Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203290
Authors: 
Kraft, Holger
Munk, Claus
Wagner, Sebastian
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper 85
Abstract: 
We solve a rich life-cycle model of household decisions involving consumption of perishable goods and housing services, habit formation for housing consumption, stochastic labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. In line with empirical observations, the optimal decisions involve (i) stock investments that are low or zero for many young agents and then gradually increasing over life, (ii) an age- and wealth-dependent housing expenditure share, (iii) non-housing consumption being significantly more sensitive to wealth and income shocks than housing consumption, and (iv) non-housing consumption being humpshaped over life.
Subjects: 
Habit formation
life-cycle household decisions
housing expenditureshare
consumption hump
stock market participation
human capital
JEL: 
G10
D14
D91
E21
R21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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