Persistence of income shocks and consumption inequality: A case in Japan
The present study investigate the relationship between the persistence of uninsurable income shocks and consumption inequality over a household's life cycle in Japan. Using a life cycle model with incomplete asset markets and calibrated parameters for the Japanese economy, we quantitatively show that moderate persistence of shocks generate a nonlinear consumption inequality profile over the life cycle. The moderate persistence of shocks well replicates the pattern of consumption inequality in Japan.
Volume (Year): 29 (2009)
Issue (Month): 4 ()
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