Interpreting life-cycle inequality patterns as an efficient allocation: mission impossible?

Alejandro Badel (ale.badel@gmail.com) and Mark Huggett

No 2010-046, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Data on consumption, earnings, wages and hours dispersion over the life cycle is commonly viewed as incompatible with a Pareto efficient allocation. We show that a model with preference and wage shocks and full insurance produces the rise in consumption, wages and hours dispersion over the life cycle found in U.S. data. The efficient allocation model requires an increasing preference shifter dispersion profile to account for an increasing consumption dispersion profile. We examine U.S. data and find support for the view that the dispersion in preference shifters increases with age.

Keywords: Consumption (Economics); Econometric models (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-dge and nep-lab
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2010/2010-046.pdf (application/pdf)

Related works:
Journal Article: Interpreting Life Cycle Inequality Patterns as an Efficient Allocation: Mission Impossible? (2014)
Working Paper: Interpreting Life-Cycle Inequality Patterns asan Efficient Allocation: Mission Impossible? (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2010-046

Ordering information: This working paper can be ordered from
subscribe@stls.frb.org

DOI: 10.20955/wp.2010.046

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis (scott.stlouis@stls.frb.org).