Consumption Patterns Over Pay Periods

Clare Kelly and Gauthier Lanot
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Clare Kelly: Department of Economics, University of Warwick,

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

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 1.2 and 7) and the extent of measurement error in the data (which accounts for approximately 60% 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: 42 pages
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp656.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:wrk:warwec:656

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