Household Saving and Full Consumption over the Life Cycle

Patricia Apps () and Ray Rees

No 280, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper extends the standard model of life cycle consumption, saving and labor supply in a number of directions. First, it argues that consumption should be defined as expenditure on household production as well as on market goods, that is, we are interested in life cycle profiles of full consumption. If this is done, several well-known puzzles concerning life cycle consumption behaviour are resolved. Secondly, we stress the importance of the heterogeneity of household behaviour in respect of female labour supply and saving, and provide evidence to show that these are very closely related across households. Finally, we formulate theoretical and empirical models incorporating these ideas and use them to show that policy changes, such as a reduction in the progressivity of income taxation, can have effects that contrast sharply with those suggested in the existing literature.

Keywords: Saving; household production; full consumption; life cycle (search for similar items in EconPapers)
JEL-codes: D13 D91 H31 J22 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2001-04
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Citations: View citations in EconPapers (24)

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Working Paper: Household Saving and Full Consumpyion Over the Life Cycle (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp280

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