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Richard Blundell
- 14 March 2014
- WORKING PAPER SERIES - No. 1656Details
- Abstract
- In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labour supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non-separability and asset accumulation decisions. We show how the model can be estimated and identified using panel data for hours, earnings, assets and consumption. We focus on the importance of family labour supply as an insurance mechanism to wage shocks and find strong evidence of smoothing of male
- JEL Code
- D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions
D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving - Network
- Household Finance and Consumption Network (HFCN)