Consumption and Children
Research output: Contribution to journal › Journal article › Research › peer-review
Consumption by couples rises sharply in the beginning and falls later in life; the causes of the early rise are hotly contested. Among the suggestions are rule of thumb behavior, demographics, liquidity constraints, the precautionary motive, and nonseparabilities between consumption and labor supply. We develop two tests of the extreme hypothesis that only changes in family structure matter. We estimate effects of the numbers and ages of children on consumption. These estimates allow us to rationalize all of the increase in consumption without recourse to any of the causal mechanisms. Our estimates can be interpreted either as giving upper bounds on the effects of children or as evidence that the other causes are not important.
|Review of Economics and Statistics
|Number of pages
|Published - 2009