Consumption Over the Life Cycle: A Selected Literature Review

Päivi Kankaanranta ()
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Päivi Kankaanranta: Department of Economics, University of Turku

No 7, Discussion Papers from Aboa Centre for Economics

Abstract: Simple life cycle and permanent income hypotheses imply that changes in consumption should be unforecastable. Rational forward-looking agents ought to smooth consumption over the life cycle and exhaust the asset stock accumulated during the working career in retirement. Empirical observations seem not to conform to these predictions of the simple theory of intertemporal choice which has given rise to elaborations on the benchmark model. The theoretical discussion of this paper concentrates on the litareture dealing with the seemingly problematic empirical regularities and on proposed explanations. The review of literature focuses particularly on the life cycle issues of consumption behaviour.

Keywords: consumption; life cycle; permanent income (search for similar items in EconPapers)
JEL-codes: B22 D11 D91 E21 (search for similar items in EconPapers)
Pages: 32
Date: 2006-08
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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