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Marital risk and capital accumulation

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Author Info
Luis Cubeddu
Jose-Victor Rios-Rull

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Abstract

Between the sixties and the late eighties the percentages of low-saving single-parent households and people living alone have grown dramatically at the expense of high-saving married households, while the household saving rate has declined equally dramatically. A preliminary analysis of population composition and savings by household type seems to indicate that about half of the decline in savings is due to demographic change. We construct a model with agents changing marital status, but where the saving behavior of the households can adjust to the properties of the demographic process. We find that the demographic changes that reduce the number of married households (mainly higher divorce and higher illegitimacy) induce all household types to save more and that the effect on the aggregate saving rate is minuscule. We conclude that the drop in savings since the sixties is not due to changes in household composition.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 235.

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Date of creation: 1997
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Handle: RePEc:fip:fedmsr:235

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Related research
Keywords: Saving and investment;

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  1. Gonzalez, Libertad & Özcan, Berkay, 2008. "The Risk of Divorce and Household Saving Behavior," IZA Discussion Papers 3726, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. David Domeij & Paul Klein, 2002. "Private Pensions: To What Extent Do They Account for Swedish Wealth Inequality?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 503-534, July. [Downloadable!] (restricted)
  3. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2007. "Accounting for changes in the homeownership rate," Working Paper 2007-21, Federal Reserve Bank of Atlanta. [Downloadable!]
    Other versions:
  4. Aydogan Ulker, 2009. "Wealth Holdings and Portfolio Allocation of the Elderly: The Role of Marital History," Journal of Family and Economic Issues, Springer, vol. 30(1), pages 90-108, March. [Downloadable!] (restricted)
  5. Luis M. Cubeddu, 1996. "The Intra-Generational Redistributive Effects of Social Security," Economics Working Papers 168, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  6. Yunhee Chang & Ki Lee, 2006. "Household Debt and Marital Instability: Evidence from the Korean Labor and Income Panel Study," Journal of Family and Economic Issues, Springer, vol. 27(4), pages 675-691, December. [Downloadable!] (restricted)
  7. Jose-Victor Rios-Rull, 2001. "The Research Agenda: Determinants of Inequality," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 3(1), November. [Downloadable!]
  8. Luis Cubeddu, 2000. "Intragenerational Redistribution in Unfunded Pension Systems," IMF Staff Papers, Palgrave Macmillan Journals, vol. 47(1), pages 4. [Downloadable!] (restricted)
  9. Jose-Victor Rios-Rull, 1997. "Computation of equilibria in heterogeneous agent models," Staff Report 231, Federal Reserve Bank of Minneapolis. [Downloadable!]
  10. S. Rao Aiyagari & Jeremy Greenwood & Ananth Seshadri, 1999. "Efficient investment in children," Discussion Paper / Institute for Empirical Macroeconomics 132, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
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