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Life insurance and household consumption

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  • Jay H. Hong
  • Jose-Victor Rios-Rull

Abstract

In this paper, we use data of life insurance holdings by age, sex, and marital status to infer how individuals value consumption in different demographic stages. Essentially, we use revealed preference to estimate equivalence scales and altruism simultaneously in the context of a fully specified model with agents facing U.S. demographic features and with access to savings markets and life insurance markets. Our findings indicate that individuals are very caring for their dependents, that there are large economies of scale in consumption, that children are costly but wives with children produce a lot of goods in the home and that while females seem to have some form of habits created by marriage, men do not. These findings contrast sharply with the standard notions of equivalence scales.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 04-10.

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Date of creation: 2004
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Handle: RePEc:fip:fedpwp:04-10

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Keywords: Insurance;

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  1. Krusell, Per & Smith, Anthony A., 1997. "Income And Wealth Heterogeneity, Portfolio Choice, And Equilibrium Asset Returns," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 387-422, June.
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Citations

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Cited by:
  1. Shannon Seitz & Jeremy Lise, 2005. "Consumption Inequality and Intra-Household Allocations," 2005 Meeting Papers 448, Society for Economic Dynamics.
  2. Bruhn, Kenneth & Steffensen, Mogens, 2011. "Household consumption, investment and life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 48(3), pages 315-325, May.
  3. Kraft, Holger & Schendel, Lorenz S. & Steffensen, Mogens, 2014. "Life insurance demand under health shock risk," SAFE Working Paper Series 40, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  4. Kenichi Ueda, 2008. "Life Expectancy and Income Convergence in the World," IMF Working Papers 08/158, International Monetary Fund.
  5. Bick, Alexander & Choi, Sekyu, 2013. "Revisiting the effect of household size on consumption over the life-cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2998-3011.
  6. David Love, 2008. "The Effect of Marital Status and Children on Savings and Portfolio Choice," Department of Economics Working Papers 2008-13, Department of Economics, Williams College.
  7. Jay Hong & Jose-Victor Rios-Rull, 2006. "Social Security, Life Insurance and Annuities for Families," 2006 Meeting Papers 410, Society for Economic Dynamics.

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