Why Do Households Save and Work?

Margherita Borella, Mariacristina De Nardi, Fang Yang and Johanna P. Torres Chain

No 33874, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper quantifies why households save and work using a life-cycle model that incorporates wage risk, endogenous labor supply of both spouses, marital transitions, health, medical expenses, mortality, and bequest motives at the death of the first and last household member. We estimate it using PSID and HRS data and conduct counterfactuals to assess the quantitative role of individual mechanisms. Precautionary saving against wage risk is smaller than in models that abstract from labor supply and within-household insurance. Bequest motives and medical expenses remain important drivers of wealth, while marriage and divorce generate large but offsetting effects across household types.

JEL-codes: E20 I1 J0 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea, nep-lab and nep-rmg
Note: EFG LS PE
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