Why Do Households Save and Work?

Margherita Borella, Mariacristina De Nardi, Johanna P. Torres Chain () and Fang Yang
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Johanna P. Torres Chain: https://cla.umn.edu/about/directory/profile/torre750

No 2526, Working Papers from Federal Reserve Bank of Dallas

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.

Keywords: savings; labor supply; couples; singles; precautionary savings; bequest motives; medical expenses (search for similar items in EconPapers)
JEL-codes: E20 I1 J0 (search for similar items in EconPapers)
Pages: 103
Date: 2025-07-15, Revised 2026-02-09
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea and nep-lab
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Why Do Households Save and Work? (2026)
Working Paper: Why Do Households Save and Work? (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:101316

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DOI: 10.24149/wp2526r1

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