The purpose of this paper is to estimate the parameters of household
preferences that determine the allocation of goods within the period and
over the life cycle, using micro data. In doing so, the authors are able
to identify important effects of demographics, labor market status, and
other household characteristics on the intertemporal allocation of
expenditure. They test the validity of the life-cycle model using excess
sensitivity tests and find that controlling for demographics and labor
market status variables can largely explain the excess sensitivity of
consumption to anticipated changes in income. Copyright 1994 by The Review of Economic Studies Limited.
