How Much Consumption Insurance in Bewley Models with Endogenous Family Labor Supply? / Chunzan Wu, Dirk Krueger.

Format:

Book

Author/Creator:

Wu, Chunzan.

Contributor:

National Bureau of Economic Research.

Krueger, Dirk.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24472.

NBER working paper series no. w24472

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

We show that a calibrated life-cycle two-earner household model with endogenous labor supply can rationalize the extent of consumption insurance against shocks to male and female wages, as estimated empirically by Blundell, Pistaferri and Saporta-Eksten (2016) in U.S. data. With additively separable preferences, 43% of male and 23% of female permanent wage shocks pass through to consumption, compared to the empirical estimates of 34% and 20%. With non-separable preferences the model predicts more consumption insurance, with pass-through rates of 29% and 16%. Most of the consumption insurance against permanent male wage shocks is provided through the labor supply response of the female earner.

Notes:

Print version record

March 2018.