Life-cycle wealth accumulation and consumption insurance

Claudio Campanale and Marcello Sartarelli

Journal of Macroeconomics, 2024, vol. 79, issue C

Abstract: Households appear to smooth consumption in the face of income shocks much more than implied by life-cycle versions of the standard incomplete market model under reference calibrations. In the current paper we explore in detail the role played by the life-cycle profile of wealth accumulation. We show that a standard model parameterized to match the latter can rationalize between 81 and 100 percent of the consumption insurance against permanent earnings shocks empirically estimated by Blundell, Pistaferri and Preston (2008), depending on the tightness of the borrowing limit.

Keywords: Precautionary savings; Epstein–Zin; Consumption insurance coefficients; Life-cycle (search for similar items in EconPapers)
JEL-codes: D15 E21 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Life-cycle Wealth Accumulation and Consumption Insurance (2018)
Working Paper: Life-cycle Wealth Accumulation and Consumption Insurance (2018)
Working Paper: Life-cycle Wealth Accumulation and Consumption Insurance (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:79:y:2024:i:c:s0164070423000666

DOI: 10.1016/j.jmacro.2023.103566

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