Series: Working Papers. 2111.
Author: Yunus Aksoy, Henrique S. Basso and Carolyn St Aubyn.
Topics: Quantitative methods | Household finances | Inequality | Prices and margins | Inflation | Health, education and welfare .
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Abstract
We document systematic and signicant time variation in US lifecycle nondurable
consumption profiles. Consumption profiles have consistently become flatter:
intergenerational differences in consumption across age groups have decreased over
time. Pooling data across different periods to identify lifecycle profiles and failing to
account for unobserved heterogeneity masks relevant time variations and may articially
generate hump-shaped consumption age profiles. The main driver behind lifecycle
consumption variations are lifecycle income changes, which display similar flattening.
Employing a lifecycle model we show changes in income are sufficient to match the
movements in consumption.