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Consumption, Working Hours, and Wealth Determination in a Life Cycle Model

June 2007
Naohito Abe*1
Noriko Inakura*2
Tomoaki Yamada*3

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This paper presents an empirical analysis of a life cycle model. We incorporate labor supply and family structure into the standard precautionary savings model and estimate structural parameters based on the moment conditions for the life cycle profiles of consumption, working hours, and wealth accumulation. Our empirical analyses with Japanese household data reveal that consideration of both family structure and idiosyncratic shocks are crucial in modeling consumption and working hours profiles simultaneously under plausible parameter values.

Life Cycle, Consumption, Asset Accumulation, Labor Supply, Structural Estimation

JEL Classification:
D12, E21, C15.

We appreciate the many helpful comments from Orazio Attanasio, Richard Blundell, Mototsugu Fukushige, Fumio Hayashi, Hidehiko Ichimura, Tokuo Iwaisako, Akiko Kamesaka, Munehisa Kasuya, Daiji Kawaguchi, Miki Kohara, Yoko Konishi, Makoto Saito, Yasuyuki Sawada, Kjetil Storesletten, and the participants at the 8th Macroeconomics Conference at Keio University, the International Conference of Microeconometric Analysis at Hitotsubashi University, and the International Workshop on Consumption at Hitotsubashi University. The first and second authors would like to acknowledge the Research and Statistics Department, Bank of Japan, for providing us with an excellent research environment.

  • *1 Institute of Economic Research, Hitotsubashi University
  • *2 Japan Center for Economic Research
  • *3 Faculty of Economics, Rissho University


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