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Prof. Frederico Belo
Associate Professor of Finance
INSEAD

Priceless consumption (PC) is a type of consumption that is not available in the marketplace and, therefore, is absent from aggregate consumption measures. We propose an estimation methodology to recover PC from its effects on the composition of observable consumption. The estimation shows that PC is economically significant: It is highly volatile and has become increasingly scarce and valuable over the past decades. As an application, we show that using the recovered true aggregate consumption series, which includes PC, significantly improves the fit of the standard consumption-CAPM with power-utility.