Household Saving and Full Consumption Over the Life Cycle

48 Pages Posted: 24 Apr 2001

See all articles by Patricia F. Apps

Patricia F. Apps

The University of Sydney Law School; IZA Institute of Labor Economics

Ray Rees

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); University of Sydney Law School

Date Written: April 2001

Abstract

This paper extends the standard model of life cycle consumption, saving and labor supply in a number of directions. First, it argues that consumption should be defined as expenditure on household production as well as on market goods, that is, we are interested in life cycle profiles of full consumption. If this is done, several well-known puzzles concerning life cycle consumption behaviour are resolved. Secondly, we stress the importance of the heterogeneity of household behaviour in respect of female labour supply and saving, and provide evidence to show that these are very closely related across households. Finally, we formulate theoretical and empirical models incorporating these ideas and use them to show that policy changes, such as a reduction in the progressivity of income taxation, can have effects that contrast sharply with those suggested in the existing literature.

Keywords: Saving, Household Production, Full Consumption, Life Cycle

JEL Classification: D13, D91, H31, J22

Suggested Citation

Apps, Patricia F. and Rees, Ray, Household Saving and Full Consumption Over the Life Cycle (April 2001). Available at SSRN: https://ssrn.com/abstract=267948

Patricia F. Apps (Contact Author)

The University of Sydney Law School ( email )

Faculty of Law, New Law Building F10
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9351 0241 (Phone)
+61 2 9351 0200 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ray Rees

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Sydney Law School ( email )

Sydney
Australia

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