Consumption Patterns over Pay Periods

Clare Kelly and Gauthier Lanot
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Clare Kelly: University College Dublin

No 112, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: This paper establishes a theoretical framework to characterise the optimal behaviour of individuals who receive income periodically but make consumption decisions at frequent points during that period, when there is uncertainty with respect to prices and imperfect credit markets. We simulate the numerical solution to this model and find that optimal consumption is u-shaped over the pay period. We apply the model to weekly expenditure data from the FES to estimate the coefficient of relative risk aversion (preliminary point estimates are around 6) and the extent of measurement error in the data (which accounts for approximately 50% of the variance in the data).

Date: 2002-08-29
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: CONSUMPTION PATTERNS OVER PAY PERIODS (2002)
Working Paper: Consumption Patterns over Pay Periods (2002)
Working Paper: Consumption Patterns over Pay Periods (2002)
Working Paper: Consumption Patterns Over Pay Periods (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ecj:ac2002:112

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