How Much Consumption Insurance in Bewley Models with Endogenous Family Labor Supply?

Dirk Krueger and Chunzan Wu

No 12828, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Keywords: Consumption insurance; Labor supply; Bewley models (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-dem, nep-dge and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://cepr.org/publications/DP12828 (application/pdf)

Related works:
Working Paper: How Much Consumption Insurance in Bewley Models with Endogenous Family Labor Supply? (2019)
Working Paper: How Much Consumption Insurance in Bewley Models with Endogenous Family Labor Supply? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12828

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP12828

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().