Life Cycle Time Allocation and Saving in an Imperfect Capital Market

Patricia Apps () and Ray Rees

No 1036, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper combines income and expenditure with time use data to provide a unique picture of the time paths of labour supplies, saving and full consumption for two-adult households over the life cycle. These data are used to test the life cycle model presented in the paper, at the core of which is the hypothesis that households face a borrowing interest rate that rises sharply with the amount of non collateral based borrowing. The household members jointly choose time paths of time use, consumption and saving over their life cycle in the face of this capital market imperfection. This model explains the data much better than does the alternative hypothesis of a perfect capital market. Finally, households are shown to differ significantly in their saving behaviour in a way that depends on secondary earner labour supply, with a strong positive association between saving and the secondary earner’s income.

Keywords: imperfect capital market; labour supply; saving; lifecycle (search for similar items in EconPapers)
JEL-codes: D13 D91 H31 J2 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2004-03
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (6)

Published - revised version published as "Family labor supply, taxation and saving in an imperfect capital market" in: Review of Economics of the Household, 2010, 8 (3), 297-323

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Working Paper: Life Cycle Time Allocation and Saving in an Imperfect Capital Market (2004)
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