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Marital risk and capital accumulation

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Author Info

  • Luis Cubeddu
  • Jose-Victor Rios-Rull

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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Bibliographic Info

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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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Divorce risk is good for the savings rate
    by Economic Logician in Economic Logic on 2012-02-23 15:53:00
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Cited by:
  1. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009. "Accounting For Changes In The Homeownership Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, 08.
  2. Aiyagari, S. Rao & Greenwood, Jeremy & Seshadri, Ananth, 2002. "Efficient Investment in Children," Journal of Economic Theory, Elsevier, vol. 102(2), pages 290-321, February.
  3. 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.
  4. Aydogan Ulker, 2008. "Wealth Holdings and Portfolio Allocation of the Elderly: The Role of Marital History," Economics Series 2008_16, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  5. Gonzalez, Libertad & Özcan, Berkay, 2008. "The Risk of Divorce and Household Saving Behavior," IZA Discussion Papers 3726, Institute for the Study of Labor (IZA).
  6. Jose-Victor Rios-Rull, 1997. "Computation of equilibria in heterogeneous agent models," Staff Report 231, Federal Reserve Bank of Minneapolis.
  7. Jose-Victor Rios-Rull, 2001. "The Research Agenda: Determinants of Inequality," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 3(1), November.
  8. 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.
  9. Luis M. Cubeddu, 1996. "The intra-generational redistributive effects of social security," Economics Working Papers 168, Department of Economics and Business, Universitat Pompeu Fabra.

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  1. Economic Logic blog

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