Consumption Inequality and Family Labor Supply

Richard Blundell (), Luigi Pistaferri and Itay Saporta-Eksten

No 9172, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 labor 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 identifi?ed using panel data for hours, earnings, assets and consumption. We focus on the importance of family labor supply as an insurance mechanism to wage shocks and fi?nd strong evidence of smoothing of male?s and female?s permanent shocks to wages. Once family labor supply, assets and taxes are properly accounted for their is little evidence of additional insurance.

Keywords: Consumption; Inequality; Labor supply (search for similar items in EconPapers)
JEL-codes: E21 J22 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-dem, nep-dge, nep-ltv and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Related works:
Journal Article: Consumption Inequality and Family Labor Supply (2016)
Working Paper: Consumption inequality and family labor supply (2014)
Working Paper: Consumption inequality and family labor supply (2014)
Working Paper: Consumption Inequality and Family Labor Supply (2012)
Working Paper: Consumption Inequality and Family Labor Supply (2012)
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