The Saving Behaviour of a Two Person Household
AbstractWives are typically younger than their husbands and women typically live longer than men. These two facts mean that for a typical married couple, wives have more incentive to save for old age than do husbands. This paper presents a theoretical model of the determination of household saving and portfolio choice taking into account differences in preferences for saving. The model is a non-cooperative game in which each person can use their own current income to contribute to current (household) consumption or to a range of assets. The results derived are in marked contrast to 'unitary' models of intertemporal allocation that assume a single household utility function and conclude that saving is unaffected by the distribution of income within the household. The most important result is that the level and the composition (portfolio) of savings and the time path of consumption is highly dependent on the distribution of income within the household. It is also shown that the introduction of an actuarially fair state pension scheme may have non-neutral effects on saving. Finally it is shown that households may invest in both an annuity and insurance for the same person which is not possible in a unitary model.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 96-09.
Length: 32 pages
Date of creation: May 1994
Date of revision: Jan 1996
Publication status: Published in: Scandinavian Journal of Economics, 2000, 102(2) pp 235-51
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Other versions of this item:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
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- Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992.
"Incomes and Outcomes: A structural Model of Intra-Household Allocation,"
DELTA Working Papers
92-23, DELTA (Ecole normale supérieure).
- Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-96, December.
- M. Browning & P. A. Chiappori, 1998.
"Efficient Intra-Household Allocations: A General Characterization and Empirical Tests,"
Econometric Society, vol. 66(6), pages 1241-1278, November.
- Browning, M. & Chiappori, P.A., 1994. "Efficient Intra-Household allocations: A General Characterization and Empirical Tests," DELTA Working Papers 94-16, DELTA (Ecole normale supérieure).
- Martin Browning & P.A. Chiappori, 1996. "Efficient Intra-Household Allocations - A General Characterization and Empirical Tests," Discussion Papers 96-10, University of Copenhagen. Department of Economics.
- Martin Browning & Pierre-Andre Chiappori, 1994. "Efficient Intra-Household Allocations: a General Characterization and Empirical Tests," Department of Economics Working Papers 1994-02, McMaster University.
- Chiappori, P.A., 1989.
"Collective Labour Supply and Welfare,"
DELTA Working Papers
89-07, DELTA (Ecole normale supérieure).
- Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
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