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Consumption Inequality and Family Labor Supply

Richard Blundell (), Luigi Pistaferri () and Itay Saporta-Eksten ()
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Itay Saporta-Eksten: Tel Aviv University

Authors registered in the RePEc Author Service: Itay Saporta Eksten ()

No 6900, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labor supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non-separability and asset accumulation decisions. We show how the model can be estimated and identified using panel data for hours, earnings, assets and consumption. We focus on the importance of family labour supply as an insurance mechanism to wage shocks and find strong evidence of smoothing of male's and female's permanent shocks to wages. Once family labor supply, assets and taxes are properly accounted for, there is little evidence of additional insurance.

Keywords: inequality; consumption; labor supply; earnings (search for similar items in EconPapers)
JEL-codes: J22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lab, nep-lma and nep-ltv
Date: 2012-10
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Forthcoming in: American Economic Review, 2015

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Related works:
Journal Article: Consumption Inequality and Family Labor Supply (2016) Downloads
Working Paper: Consumption inequality and family labor supply (2014) Downloads
Working Paper: Consumption inequality and family labor supply (2014)
Working Paper: Consumption Inequality and Family Labor Supply (2012) Downloads
Working Paper: Consumption Inequality and Family Labor Supply (2012) Downloads
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