Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107413
Authors: 
Kraft, Holger
Munk, Claus
Wagner, Sebastian
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper Series 85
Abstract: 
We set up and solve a rich life-cycle model of household decisions involving consumption of both perishable goods and housing services, stochastic and unspanned labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. The model features habit formation for housing consumption, which leads to optimal decisions closer in line with empirical observations. Our model can explain (i) that stock investments are low or zero for many young agents and then gradually increasing over life, (ii) that the housing expenditure share is age- and wealth-dependent, (iii) that perishable consumption is more sensitive to wealth and income shocks than housing consumption, and (iv) that non-housing consumption is hump-shaped over life.
Subjects: 
habit formation
life-cycle household decisions
housing expenditure share
consumption hump
stock market participation
renting vs. owning home
human capital
JEL: 
G10
D14
D91
E21
R21
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.