Consumption Patterns over Pay Periods

Clare Kelly and Gauthier Lanot
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Clare Kelly: University of Warwick

Microeconomics from University Library of Munich, Germany

Abstract: This paper establishes a theoretical framework to characterise the optimal behaviour of individuals who receive income periodically but make consumption decisions on a more frequent basis. The model incorporates price uncertainty and imperfect credit markets. The simulated numerical solution to this model shows that weekly consumption functions are ordered such that the functions within the payment period are highest in the first and the last week of the payment cycle for all wealth levels. Using weekly expenditure data from the FES we estimate the coefficient of relative risk aversion (point estimates are between 2 and 7) and the extent of measurement error in the data (which accounts for approximately 50\% of the variance in the data).

Keywords: Consumption; liquidity constraints; uncertainty; credit cards (search for similar items in EconPapers)
JEL-codes: D11 D12 D91 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2002-11-05
Note: Type of Document - pdf; prepared on pc; pages: 48
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Citations: View citations in EconPapers (4)

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https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0211/0211013.pdf (application/pdf)

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:wpa:wuwpmi:0211013

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