Working Paper, March 2012. (pdf)
This paper studies the relationship between consumer incomes and ages of the durable goods consumed. At the household level, it presents evidence from the Consumer Expenditure Survey of a negative correlation between incomes and ages of the vehicles owned, controlling for the size of the vehicle stock. At the aggregate level, it constructs a dynamic, heterogeneous agents, discrete choice model with multiple vehicle ownership, to study the relationship between the distribution of consumer incomes and the distribution of vehicle vintages. Two versions of the model are solved, one with the restriction of at most one vehicle per agent and one with multiple vehicle ownership. For each version of the model, the parameters are calibrated to match vehicle ownership data for 2001. The moments of the income distribution are then varied to generate predictions for mean and median ages of vehicles and the results from the two versions of the model are compared. While these are mostly similar, some of the differences are quite illuminating.