In Economics, what is life-cycle hypothesis?

This suggests that individuals even out their consumption in the best possible manner over their life cycles. The hypothesis is that people who are young usually have several years of productive employment ahead of them, so they tend to borrow money to fund their education and consumption needs, while people who are older tend to be more conservative about their borrowing and spending habits as they have fewer years of productive employment ahead of them. The life-cycle hypothesis was proposed by Italian economist Franco Modigliani and his student Richard Brumberg in 1957.

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Printable version | Nov 29, 2021 6:13:42 PM |

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