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UNDERSTANDING THE COSTS OF CONSUMER DURABLE ADJUSTMENTS
Author(s) -
Suzuki Michio
Publication year - 2016
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12333
Subject(s) - durable good , consumer expenditure survey , economics , consumption (sociology) , variance (accounting) , econometrics , matching (statistics) , permanent income hypothesis , microeconomics , aggregate expenditure , macroeconomics , mathematics , statistics , life cycle hypothesis , social science , accounting , sociology
This article examines whether adjustment frictions help account for the patterns of household consumption expenditures observed in the Consumer Expenditure Survey, namely, that the variance of log durable expenditure is four times larger than that of log nondurable expenditure for annual data and this gap substantially widens for quarterly data. Estimating a structural model of household consumption with nondurable and durable goods with the simulated method of moments, I find that the fixed costs associated with durable adjustments are important in matching the cross‐sectional moments. Using the estimated model, I also examine the response of nondurable and durable expenditures to income shocks. ( JEL D12, D91, E21)