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Risk-Sharing, Altruism, and the Factor Structure of Consumption

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  • Fumio Hayashi
  • Joseph Altonji
  • Laurence Kotlikoff

Abstract

We consider four models of consumption that differ with respect to efficient risk-sharing and altruism. They range from complete markets with altruism to family risk-sharing. We use a matched sample of parents and independent children available from the Panel Study of Income Dynamics to discriminate between the four models. Our testing procedure is designed to deal with the set of observed independent children being endogenously selected. The combined hypothesis of complete markets and altruism can be decisively rejected, while we fail to reject altruism and hence family risk-sharing for a subset of families.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3834.

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Date of creation: Sep 1991
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Publication status: published as new title, "Risk-Sharing Between and Within Families," Econometrica, March 1996
Handle: RePEc:nbr:nberwo:3834

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  1. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center, Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
  2. Lars Peter Hansen & Thomas J. Sargent, 1990. "Recursive Linear Models of Dynamic Economies," NBER Working Papers 3479, National Bureau of Economic Research, Inc.
  3. Sumru Altug & Robert A. Miller, 1987. "Household choices in equilibrium," Working Papers, Federal Reserve Bank of Minneapolis 341, Federal Reserve Bank of Minneapolis.
  4. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
  5. Wright, Randall D., 1987. "Market structure and competitive equilibrium in dynamic economic models," Journal of Economic Theory, Elsevier, Elsevier, vol. 41(1), pages 189-201, February.
  6. John H. Cochrane, 1988. "A Test of Consumption Insurance," NBER Working Papers 2642, National Bureau of Economic Research, Inc.
  7. Joseph G. Altonji & Aloysius Siow, 1986. "Testing the Response of Consumption to Income Changes with (Noisy) PanelData," NBER Working Papers 2012, National Bureau of Economic Research, Inc.
  8. Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc.
  9. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, Econometric Society, vol. 57(4), pages 779-813, July.
  10. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
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Cited by:
  1. Young Chun, 2001. "The Redistributive Effect of Risky Taxation," International Tax and Public Finance, Springer, Springer, vol. 8(4), pages 433-454, August.
  2. Kjetil Storesletten & Chris Telmer & Amir Yaron, 1997. "Consumption and risk sharing over the life cycle," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 228, Carnegie Mellon University, Tepper School of Business.
  3. Kjetil Storesletten & Chris Telmer & Amir Yaron, . "Asset pricing with idiosyncratic risk and overlapping generations," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 226, Carnegie Mellon University, Tepper School of Business.
  4. Kozmenko, Olha & Kuzmenko, Olha, 2013. "Modeling the stability dynamics of Ukrainian banking system," MPRA Paper 50841, University Library of Munich, Germany.
  5. Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2001. "How Important Are Idiosyncratic Shocks? Evidence from Labor Supply," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 413-417, May.
  6. Thierry Timmermans, 2001. "Monitoring the macroeconomic determinants of banking system stability," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 117-137 Bank for International Settlements.
  7. Alderman, Harold & Paxson, Christina H & DEC, 1992. "Do the poor insure? A synthesis of the literature on risk and consumption in developing countries," Policy Research Working Paper Series, The World Bank 1008, The World Bank.

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