Earnings, consumption and lifecycle choices

Costas Meghir and Luigi Pistaferri

No W10/05, IFS Working Papers from Institute for Fiscal Studies

Abstract:

We discuss recent developments in the literature that studies how the dynamics of earnings and wages affect consumption choices over the life cycle. We start by analyzing the theoretical impact of income changes on consumption - highlighting the role of persistence, information, size and insurability of changes in economic resources. We next examine the empirical contributions, distinguishing between papers that use only income data and those that use both income and consumption data. The latter do this for two purposes. First, one can make explicit assumptions about the structure of credit and insurance markets and identify the income process or the information set of the individuals. Second, one can assume that the income process or the amount of information that consumers have are known and tests the implications of the theory. In general there is an identification issue that is only recently being addressed, with better data or better "experiments". We conclude with a discussion of the literature that endogenize people's earnings and therefore change the nature of risk faced by households.

Date: 2010-04-16
New Economics Papers: this item is included in nep-dge and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.ifs.org.uk/wps/wp1005.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ifs.org.uk/wps/wp1005.pdf [301 Moved Permanently]--> https://www.ifs.org.uk/wps/wp1005.pdf [302 Found]--> https://ifs.org.uk/wps/wp1005.pdf)

Related works:
Chapter: Earnings, Consumption and Life Cycle Choices (2011)
Working Paper: Earnings, Consumption and Lifecycle Choices (2010)
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:ifs:ifsewp:10/05

Ordering information: This working paper can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this paper

More papers in IFS Working Papers from Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Bibliographic data for series maintained by Emma Hyman ().