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The Saving Behaviour of a Two Person Household

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  • Martin Browning

Abstract

Wives 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 consumption 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 saving 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.

Suggested Citation

  • Martin Browning, 1994. "The Saving Behaviour of a Two Person Household," Department of Economics Working Papers 1994-01, McMaster University.
    • Handle: RePEc:mcm:deptwp:1994-01
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    References listed on IDEAS

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    1. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
    2. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
    3. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-467, June.
    4. 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 1067-1096, December.
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    Cited by:

    1. Rob Alessie & Agar Brugiavini & Guglielmo Weber, 2006. "Saving and Cohabitation: The Economic Consequences of Living with One's Parents in Italy and the Netherlands," NBER Chapters, in: NBER International Seminar on Macroeconomics 2004, pages 413-457, National Bureau of Economic Research, Inc.
    2. Vital Anderhuba & Dennis A. V. Dittrich & Werner Güth & Nadege Marchandd, "undated". "Interpersonal allocation behavior in a household saving experiment," Papers on Strategic Interaction 2002-02, Max Planck Institute of Economics, Strategic Interaction Group.
    3. Laurens CHERCHYE & Thomas DEMUYNCK & Bram DE ROCK, 2010. "Noncooperative household consumption with caring," Working Papers of Department of Economics, Leuven ces10.34, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    4. Alessie, Rob & Lusardi, Annamaria & Kapteyn, Arie, 1995. "Saving and wealth holdings of the elderly," Ricerche Economiche, Elsevier, vol. 49(3), pages 293-314, September.
    5. Nordblom, Katarina, 1997. "Precautionary Saving and Altruism," Working Paper Series 1997:19, Uppsala University, Department of Economics.
    6. Boone, J. & van der Wiel, K.M. & Vermeulen, F.M.P., 2009. "Kinky Choices, Dictators and Split Might : A Non-Cooperative Model for Household Consumption and Labor Supply," Discussion Paper 2009-53, Tilburg University, Center for Economic Research.
    7. Chris van Klaveren & Bernard M.S. van Praag & Henriëtte Maassen van den Brink, 2005. "Empirical Estimation Results of a Collective Household Time Allocation Model," Tinbergen Institute Discussion Papers 05-096/3, Tinbergen Institute, revised 06 Apr 2006.
    8. Rosen, H.S.Harvey S. & Wu, Stephen, 2004. "Portfolio choice and health status," Journal of Financial Economics, Elsevier, vol. 72(3), pages 457-484, June.
    9. Saku Aura, 2002. "Uncommitted Couples: Some Efficiency and Policy Implications of Marital Bargaining," Working Papers 0217, Department of Economics, University of Missouri.
    10. Leora Friedberg & Anthony Webb, 2006. "Determinants and Consequences of Bargaining Power in Households," NBER Working Papers 12367, National Bureau of Economic Research, Inc.
    11. Therese Jefferson, 2005. "Women and Retirement Incomes in Australia: A Review," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 273-291, September.
    12. Samuli Knüpfer & Elias Rantapuska & Matti Sarvimäki, 2023. "Social Interaction in the Family: Evidence from Investors’ Security Holdings," Review of Finance, European Finance Association, vol. 27(4), pages 1297-1327.
    13. Jean-Marie Baland & Roberta Ziparo, 2017. "Intra-household bargaining in poor countries," WIDER Working Paper Series wp-2017-108, World Institute for Development Economic Research (UNU-WIDER).
    14. Shelly J. Lundberg & Jennifer Ward-Batts, 2000. "Saving for Retirement: Household Bargaining and Household Net Worth," Econometric Society World Congress 2000 Contributed Papers 1414, Econometric Society.
    15. Hikaru Ogawa, 2005. "The Distribution of Household Income in Marriage," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(3), pages 261-275, September.
    16. Laura Crespo, 2005. "Estimation And Testing Of Household Labour Supply Models: Evidence From Spain," Working Papers. Serie AD 2005-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    17. Luc Christiaensen & Lei Pan, 2010. "Transfers and Development: Easy Come, Easy Go?," WIDER Working Paper Series wp-2010-125, World Institute for Development Economic Research (UNU-WIDER).
    18. Francois-Charles Wolff, 2001. "Private intergenerational contact in France and the demonstration effect," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 143-153.
    19. Therese Jefferson, 2007. "Discussing Retirement: Insights from a Qualitative Research Project," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 10(2), pages 129-145.
    20. Safdar Ullah Khan & Satyanarayana Ramella & Habib Ur Rahman & Zulfiqar Hyder, 2022. "Household Portfolio Allocations: Evidence on Risk Preferences from the Household, Income, and Labour Dynamics in Australia (HILDA) Survey Using Tobit Models," JRFM, MDPI, vol. 15(4), pages 1-13, April.
    21. Susanne Büchner & Dennis A. V. Dittrich, 2002. "I will survive! -- Gender discrimination in a household saving decisions experiment," Papers on Strategic Interaction 2002-14, Max Planck Institute of Economics, Strategic Interaction Group.
    22. Austen, Siobhan & Kalsi, Jaslin Kaur & Mavisakalyan, Astghik, 2022. "Retirement and the distribution of intra-household wellbeing," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    23. San Vicente Portes Luis & Atal Vidya & Juárez-Torres Miriam, 2019. "Women's Empowerment: Aggregate Effects on Savings and Wealth," Working Papers 2019-21, Banco de México.

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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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