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Life Insurance and Household Consumption

Listed author(s):
  • Jay H. Hong
  • José-Víctor Ríos-Rull

Using life insurance holdings by age, sex, and marital status, we infer how individuals value consumption in different demographic stages. We estimate equivalence scales and bequest motives simultaneously within a fully specified model where agents face US demographics and save and purchase life insurance. Our findings indicate that individuals are very caring for dependents, that economies of scale are large, that children are very costly (or yield very high marginal utility), that wives with children produce lots of home goods, and that females display habits from marriage, while men do not. These findings contrast sharply with standard equivalence scales.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3701
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File URL: http://www.aeaweb.org/aer/data/dec2012/20101202_data.zip
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File URL: http://www.aeaweb.org/aer/data/dec2012/20101202_data.zip
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 7 (December)
Pages: 3701-3730

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:7:p:3701-30
Note: DOI: 10.1257/aer.102.7.3701
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  11. Jeremy Greenwood & Nezih Guner & John A. Knowles, 2003. "More on Marriage, Fertility, and the Distribution of Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 827-862, 08.
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  16. Igal Hendel & Alessandro Lizzeri, 2003. "The Role of Commitment in Dynamic Contracts: Evidence from Life Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 299-328.
  17. B. Douglas Bernheim & Lorenzo Forni & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2001. "The mismatch between life insurance holdings and financial vulnerabilities: evidence from the Health and Retirement Survey," Working Paper 0109, Federal Reserve Bank of Cleveland.
  18. Virginia Sanchez-Marcos & Orazio Attanasio & Hamish Low, 2004. "Explaining Changes in Female Labour Supply in a Life-Cycle Model," 2004 Meeting Papers 492, Society for Economic Dynamics.
  19. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
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  23. Lundberg, Shelly & Startza, Richard & Stillman, Steven, 2003. "The retirement-consumption puzzle: a marital bargaining approach," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1199-1218, May.
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  27. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-349, June.
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