EconPapers    
Economics at your fingertips  
 

Income risk and consumption inequality: a simulation study

Richard Blundell (), Hamish Low and Ian Preston ()

No W04/26, IFS Working Papers from Institute for Fiscal Studies

Abstract: This paper assesses the accuracy of decomposing income risk into permanent and transitory components using income and consumption data. We develop a specific approximation to the optimal consumption growth rule and use Monte Carlo evidence to show that this approximation can provide a robust method for decomposing income risk. The availability of asset data enables the use of a more accurate approximation allowing for partial self-insurance against permanent shocks. We show that the use of data on median asset holdings corrects much of the error in the simple approximation which assumes no self-insurance against permanent shocks.

Keywords: income risk; inequality; approximation methods; con- (search for similar items in EconPapers)
JEL-codes: C30 D52 D91 (search for similar items in EconPapers)
Pages: 27 pp.
Date: 2004-10-01
New Economics Papers: this item is included in nep-cmp and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.ifs.org.uk/wps/wp0426.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ifs.org.uk/wps/wp0426.pdf [301 Moved Permanently]--> https://www.ifs.org.uk/wps/wp0426.pdf [302 Found]--> https://ifs.org.uk/wps/wp0426.pdf)

Related works:
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:ifs:ifsewp:04/26

Ordering information: This working paper can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this paper

More papers in IFS Working Papers from Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Bibliographic data for series maintained by Emma Hyman ().

 
Page updated 2024-04-21
Handle: RePEc:ifs:ifsewp:04/26