Life-Cycle Consumption and Children
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Life-Cycle Consumption and Children. / Jørgensen, Thomas Høgholm.
Kbh. : Centre for Applied Microeconometrics. Department of Economics, University of Copenhagen, 2014.Research output: Working paper › Research
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TY - UNPB
T1 - Life-Cycle Consumption and Children
AU - Jørgensen, Thomas Høgholm
N1 - JEL classification: D12; D14; D91; E21
PY - 2014
Y1 - 2014
N2 - I show that conventional estimators based on the consumption Euler equation, extensively used in studies of intertemporal consumption behavior, produce inconsistent estimates of the effect of children on consumption if potentially binding credit constraints are ignored. As a more constructive contribution, I supply a tractable approach to obtaining bounds on the effect of children and a structural estimation strategy when households face constraints. Finally, I estimate the effect of children on consumption using the Panel Study of Income Dynamics (PSID) for the US and high quality Danish administrative register data. Results suggest that children does not affect household consumption in the same magnitude previously assumed.
AB - I show that conventional estimators based on the consumption Euler equation, extensively used in studies of intertemporal consumption behavior, produce inconsistent estimates of the effect of children on consumption if potentially binding credit constraints are ignored. As a more constructive contribution, I supply a tractable approach to obtaining bounds on the effect of children and a structural estimation strategy when households face constraints. Finally, I estimate the effect of children on consumption using the Panel Study of Income Dynamics (PSID) for the US and high quality Danish administrative register data. Results suggest that children does not affect household consumption in the same magnitude previously assumed.
KW - Faculty of Social Sciences
KW - consumption
KW - children
KW - life cycle
KW - credit constraints
KW - Structural estimation
M3 - Working paper
T3 - CAM working papers
BT - Life-Cycle Consumption and Children
PB - Centre for Applied Microeconometrics. Department of Economics, University of Copenhagen
CY - Kbh.
ER -
ID: 100306216