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Working Paper
Household Consumption and Savings over the Life Cycle: The Roles of Demographics and Durables
The canonical prediction of life-cycle models, that individuals smooth consumption over their lifetime, has been mostly tested for developed countries and found little empirical support. We provide a novel, developing country perspective by analyzing patterns of life-cycle consumption, income and savings rates in India. In contrast to the U.S., Indian households exhibit no growth in nondurable consumption expenditures after adjusting for family size. We present evidence that saving for lumpy investments in consumer durables is a key driver of high savings rates and flat nondurable consumption ...
Working Paper
Household Consumption and Savings over the Life Cycle: The Roles of Demographics and Durables
The canonical prediction of life-cycle models, that individuals smooth consumption over their lifetime, has mostly been tested in developed countries and found little empirical support. We provide a novel developing-country perspective by analyzing patterns of life cycle consumption, income, and savings rates in India. In contrast to the U.S., Indian households exhibit little growth in nondurable consumption expenditures after adjusting for family size. Surprisingly, this flat adjusted profile coexists with substantial income growth and a sharp rise in the savings/surplus rate over the life ...