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Humps and Bumps in Lifetime Consumption |
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| Authors: | Orazio P. Attanasio James Banks Costas Meghir Guglielmo Weber |
| Affiliation: | 1. Department of Economics , Institute for Fiscal Studies and University College London , London , WC1E 6BT , United Kingdom E-mail: o.attanasio@ucl.ac.uk;2. Institute for Fiscal Studies , London , WC1E 7AE , United Kingdom E-mail: james.banks.@ifs.org.uk;3. Institute for Fiscal Studies , London , WC1E 7AE , United Kingdom;4. Department of Economics , University College London , London , WC1E 6BT , United Kingdom E-mail: c.meghir@ucl.ac.uk;5. Department of Economics , Universita di Padova , 1-35123 Padova E-mail: weber@decon.unipd.it |
| Abstract: | In this article we argue that the life-cycle model that allows demographics to affect household preferences and relaxes the assumption of certainty equivalence can generate hump-shaped consumption profiles over age that are very similar to those observed in household-level data sources and, in particular, match the differences in shape across different education groups. Liquidity constraints or myopia are not required to explain the empirical features of observed life-cycle patterns. |
| Keywords: | Hump-shaped consumption profiles Numerical solutions of life-cycle models Precautionary saving |