Family Labor Supply and Aggregate Saving

Paulo Santos Monteiro

No 269886, Economic Research Papers from University of Warwick - Department of Economics

Abstract: I study the impact of idiosyncratic risk on savings and employment in a small open economy populated by two-member families. Families incur a fixed cost of participation when both members are employed. Because of market incompleteness and information asymmetries, this cost coupled with labor market frictions can generate multiple equilibria. In particular, there might be one equilibrium with high employment and low saving and another one with low employment and high saving. The model predicts that aggregate saving and employment rates are negatively correlated across countries. I present empirical evidence that supports the general equilibrium prediction of the model.

Keywords: Financial Economics; Labor and Human Capital (search for similar items in EconPapers)
Pages: 30
Date: 2008-10-23
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269886

DOI: 10.22004/ag.econ.269886

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