Euler equation estimation: Children and credit constraints

Artikel

Conventional estimators based on the consumption Euler equation, intensively used in studies of intertemporal consumption behavior, produce biased estimates of the effect of children on the marginal utility of consumption if consumers face credit constraints. As a more constructive contribution, I propose a tractable approach to obtaining bounds on the effect of children on the marginal utility of consumption. I estimate these bounds using the Panel Study of Income Dynamics and find that conventional estimators yield point estimates that are above the upper bound. Children might, thus, not increase the marginal utility of consumption as much as previously assumed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 7 ; Year: 2016 ; Issue: 3 ; Pages: 935-968 ; New Haven, CT: The Econometric Society

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis ; Household Saving; Personal Finance ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Subject: Consumption ; Euler equation estimation ; credit constraints ; children ; demographics ; life cycle ; bounds

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jørgensen, Thomas Høgholm
• Event: Veröffentlichung
• (who): The Econometric Society
• (where): New Haven, CT
• (when): 2016

Further information

• DOI: doi:10.3982/QE492
• Handle: http://hdl.handle.net/10419/195530
• Last update: 10.03.2025, 11:44 AM CET