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CONSUMPTION AND TIME USE OVER THE LIFE CYCLE
Author(s) -
Dotsey Michael,
Li Wenli,
Yang Fang
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12066
Subject(s) - microdata (statistics) , consumption (sociology) , economics , complementarity (molecular biology) , production (economics) , constraint (computer aided design) , general equilibrium theory , microeconomics , business cycle , econometrics , labour economics , macroeconomics , population , mathematics , social science , demography , geometry , sociology , biology , census , genetics
We incorporate home production in a dynamic general equilibrium model of consumption and savings with illiquid housing and a collateralized borrowing constraint. The calibrated model explains life‐cycle patterns of households' time use and consumption of different categories documented from the microdata. It predicts that the interaction of the labor efficiency profile and the home production technology explains households' time use. The resulting income profiles, the endogenous borrowing constraint, and home production account for the initial hump in consumption. The complementarity of home hours, home input, and housing in home production drives the consumption profiles later in the life cycle.