UNDERSTANDING THE COSTS OF CONSUMER DURABLE ADJUSTMENTS

This article examines whether adjustment frictions help account for the patterns of household consumption expenditures observed in the Consumer Expenditure Survey, namely, that the variance of log durable expenditure is four times larger than that of log nondurable expenditure for annual data and th...

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Bibliographic Details
Published inEconomic Inquiry Vol. 54; no. 3; pp. 1561 - 1573
Main Author Suzuki, Michio
Format Journal Article
LanguageEnglish
Published Boston, USA Wiley Periodicals, Inc 01.07.2016
Wiley
Wiley-Blackwell
Blackwell Publishers Ltd
Western Economic Association
Subjects
Adjustments
Analysis
Consumer expenditure
Consumer spending
Consumption
Consumption (Economics)
Durable goods
Economic models
Expenditures
Fixed costs
Nondurable goods
Studies
United States
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Summary:This article examines whether adjustment frictions help account for the patterns of household consumption expenditures observed in the Consumer Expenditure Survey, namely, that the variance of log durable expenditure is four times larger than that of log nondurable expenditure for annual data and this gap substantially widens for quarterly data. Estimating a structural model of household consumption with nondurable and durable goods with the simulated method of moments, I find that the fixed costs associated with durable adjustments are important in matching the cross‐sectional moments. Using the estimated model, I also examine the response of nondurable and durable expenditures to income shocks. (JEL D12, D91, E21)
Bibliography:ark:/67375/WNG-PSLQ5976-9
istex:625ADAD9779C71057F6DD7E704BD41960C3538BA
ArticleID:ECIN12333
SourceType-Scholarly Journals-1
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ISSN:0095-2583
1465-7295
DOI:10.1111/ecin.12333