CONSUMER DEMAND AND THE LIFE-CYCLE ALLOCATION OF HOUSEHOLD EXPENDITURES

The purpose of this paper is to estimate the parameters of household p references that determine the allocation of goods within the period an d over the life cycle, using micro data. In doing so we are able to id entify important effects of demographics, labour market status and oth er household characteristics on the intertemporal allocation of expend iture. We test the validity of the life-cycle model using excess sensi tivity tests and find that controlling for demographics and labour mar ket status variables can largely explain the excess sensitivity of con sumption to anticipated changes in income.