Examining the Profile of Consumption and Income of Iranian Households During Life Cycles

Subject Areas : Miscellaneous Categories

Farzaneh Anvari ¹ , Sajjad Barkhordari ² , Mohsen Mehrara ³

1 - PhD student, Department of Economics, University of Tehran, Tehran, Iran
2 - Associate Professor, Department of Economics, University of Tehran, Tehran, Iran
3 - Professor, Department of Economics, University of Tehran, Tehran, Iran

Received: 2023-07-13 Accepted : 2023-11-16 Published : 2023-08-23

Keywords: Consumption, Income, Savings, Inheritance, Uncertainty and Absolute Certainty, JEL Classification: D12, D31, D91, E21,

Abstract :

This study, using the dynamic planning approach and using the statistics and information obtained from the cost and income of Iranian households in the theoretical framework of the life cycle theory of Modigliani and Brumberg (1954), examines the consumption and income profile of the life cycles of Iranian households in the form of two versions. "Certainty Equivalent " and " Buffer stock " (which is equivalent to consumption under uncertainty) from Friedman's theory of permanent income and separate different educational groups and occupations. The results of this study show that in all of these profiles, consumption and income profiles follow entirely each other before the age of 45; In this way, it can be claimed that the CEQ theory is valid until the age of 45 and can explain the consumption and income profile of Iranian households well. The changes in the consumption behavior of Iranian households after the age of 45 show the change in preferences and the uncertainty of future incomes, so the profile of consumption and income after the age of 45 can only be explained with models that also consider uncertainty . Other results of this study show that Iranian households save up to the age of 45 with a "precautionary" motive; After the age of 45, the precautionary motivation to save is weakened, and with the change of preferences and the type of uncertainty, the motivation to "finance retirement expenses" is strengthened, and after the age of 65, they save with the motivation of inheritance.

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