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Consumption Inequality and Family Labor Supply

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Author Info

  • Blundell, Richard

    ()
    (University College London)

  • Pistaferri, Luigi

    ()
    (Stanford University)

  • Saporta-Eksten, Itay

    ()
    (Stanford University)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6900.

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Length: 76 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6900

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Keywords: inequality; consumption; labor supply; earnings;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Consumption Inequality and Family Labor Supply
    by maximorossi in NEP-LTV blog on 2012-10-21 20:23:54
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Cited by:
  1. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2013. "Childcare Subsidies and Household Labor Supply," Working Papers 738, Barcelona Graduate School of Economics.
  2. Richard Blundell & Michael Graber & Magne Mogstad, 2014. "Labor income dynamics and the insurance from taxes, transfers and the family," IFS Working Papers W14/01, Institute for Fiscal Studies.
  3. Paul Bingley & Lorenzo Cappellari, 2013. "Correlation of Brothers Earnings and Intergenerational Transmission," DISCE - Working Papers del Dipartimento di Economia e Finanza def6, UniversitĂ  Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  4. Felix Reichling & Charles Whalen, 2012. "Review of Estimates of the Frisch Elasticity of Labor Supply: Working Paper 2012-13," Working Papers 43676, Congressional Budget Office.
  5. Vasilev, Aleksandar, 2013. "On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework," SIRE Discussion Papers 2013-84, Scottish Institute for Research in Economics (SIRE).

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