Family labor supply, precautionary behavior, aggregate saving and employment

Paulo Santos Monteiro

MPRA Paper from University Library of Munich, Germany

Abstract: I study the impact of idiosyncratic earnings uncertainty on aggregate saving and employment in an economy populated by families consisting of two members. Families incur a fixed cost of participation when both members are employed. I argue that, because of market incompleteness and private information, the presence of this fixed cost can generate multiplicity of equilibrium. In particular there might be one equilibrium with high (female) employment and low savings and another one with low employment and high savings. The model suggests that aggregate saving and employment rates should be negatively correlated across countries. Finally, I present empirical evidence that supports both the partial and the general equilibrium predictions of the model.

Keywords: Aggregate saving; Employment; Family labor supply; Multiplicity (search for similar items in EconPapers)
JEL-codes: D52 E21 J22 (search for similar items in EconPapers)
Date: 2005, Revised 2007-03
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:2113

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