Intra-Household Insurance and the Intergenerational Transmission of Income Risk

Francesco Agostinelli, Domenico Ferraro, Xincheng Qiu and Giuseppe Sorrenti

No 22027, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the mechanisms and the extent to which parental wage risk passes through to children’s skill development. Through a quantitative dynamic labor supply model in which two parents choose whether to work short or long hours or not work at all, time spent with children, and child-related expenditures, we find that increased wage risk reduces children’s skill levels at the end of childhood. To the extent that making up for cognitive skill losses during childhood is hard—as available evidence suggests—uninsurable income risk can negatively impact the labor market prospects of future generations.

JEL-codes: D1 H24 J13 J22 (search for similar items in EconPapers)
Date: 2026-10
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