How important is intra-household risk sharing for savings and labor supply?

Salvador Ortigueira and Nawid Siassi

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: While it is recognized that the family is primarily an institution for risk sharing, little is known about the quantitative effects of this informal source of insurance on savings and labor supply. In this paper, we present a model where workers (females and males) are subject to idiosyncratic employment risk and where capital markets are incomplete. A household is formed by a female and a male, who make collective decisions on consumption, savings and labor supplies. We find that intra-household risk sharing has its largest impact among wealthpoor households. While the wealth-rich use mainly savings to smooth consumption across unemployment spells, wealth-poor households rely on spousal labor supply. For instance, for low-wealth households, average hours worked by wives of unemployed husbands are 8% higher than those worked by wives of employed husbands. This response in wives’ hours makes up 9% of lost family income. We also study the crowding out effects of public unemployment insurance on other sources of private insurance, and consumption losses upon an unemployment spell

Keywords: Intra-household; risk; sharing; Collective; household; model; Idiosyncratic; unemployment; risk; Incomplete; markets; Precautionary; motive (search for similar items in EconPapers)
JEL-codes: D13 D91 E21 (search for similar items in EconPapers)
Date: 2011-09-23
New Economics Papers: this item is included in nep-dge and nep-lab
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: How important is intra-household risk sharing for savings and labor supply? (2013)
Working Paper: How important is Intra-household Risk Sharing for Savings and Labor Supply? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we1132

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