Consumption Inequality and Family Labor Supply

Richard Blundell (), Luigi Pistaferri and Itay Saporta-Eksten ()
Additional contact information
Itay Saporta-Eksten: Tel Aviv University
Authors registered in the RePEc Author Service: Itay Saporta Eksten

No 6900, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 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's and female's permanent shocks to wages. Once family labor supply, assets and taxes are properly accounted for, there is little evidence of additional insurance.

Keywords: earnings; labor supply; consumption; inequality (search for similar items in EconPapers)
JEL-codes: J22 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2012-10
New Economics Papers: this item is included in nep-dge, nep-lab, nep-lma and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

Published - published in: American Economic Review, 2016, 106 (2), 387 - 435

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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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