Premium
Consumption, Income, and Wealth: Evidence from Age, Cohort, and Period Elasticities
Author(s) -
Lim G. C.,
Zeng Q.
Publication year - 2016
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12182
Subject(s) - economics , baby boom , cohort effect , boom , consumption (sociology) , cohort , demographic economics , income elasticity of demand , consumer expenditure survey , permanent income hypothesis , econometrics , labour economics , monetary economics , life cycle hypothesis , macroeconomics , demography , population , aggregate expenditure , medicine , social science , environmental engineering , sociology , engineering
This paper examines the relationship between non‐durable consumption, income, and wealth (housing and financial) allowing explicitly for generational heterogeneity. A framework is proposed to disentangle cohort, age, and period effects and the empirical analysis is based on the U . S . Consumer Expenditure Survey data. We find that there are significant generational differences and the results highlight the range of elasticities implicit in results presented, thus far, by age groups. Moreover, we find supporting evidence of humped shaped age profiles for the elasticity of consumption with respect to income and the importance of financial wealth for those aged 60+. The framework also allows us to generate cohort profiles which draw attention to the negative role of housing wealth for generation X, and period profiles which reinforce the role of financial wealth for the baby‐boom generation.