Deconstructing Life-cycle Consumption with Home Production

No 670, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: We incorporate home production in a dynamic stochastic general equilibrium model of household consumption and saving with illiquid housing and endogenous collateralized borrowing constraint. We show that such a model is capable of explaining life-cycle patterns of households' time use and their consumption of different categories. Specifically, households' market hours increase initially as households age, then decline sharply. By contrast, households' home hours are much more stable and start to increase only later in life. Households' consumption of market good, home good, and housing services all exhibit hump shape over the life cycle, with market good having the most pronounced hump, followed by home good, and then housing services. A plausibly parameterized version of our model predicts that the interaction of labor efficiency profile and the availability of pension fund explain households' time use over the life cycle. The resulting income profile as well as endogenous borrowing constraints account for the initial humps in all three consumption goods. The consumption profiles in second half of the life cycle are mostly driven by the complementarity of home hours, home good, and housing in home production.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2009/paper_670.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed009:670

Access Statistics for this paper

More papers in 2009 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().