Deconstructing life cycle expenditure

We revisit two well-known facts regarding life cycle expenditures: the "hump"-shaped profile of nondurable expenditures and the increase in cross-household consumption inequality. We document that the behavioroftotal nondurables masks surprising heterogeneityinthe life cycle profile of individual consumption subcomponents. We provide evidence that the categories driving life cycle consumption either are inputs into market work or are amenable to home production. Using a quantitative model, we document that the disaggregated life cycle consumption profiles imply a level of uninsurable permanent income risk that issubstantially lower than that impliedby amodel usingacomposite consumption good.