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From income to consumption: measuring households partial insurance

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  • José Casado

Abstract

This paper computes the degree of consumption insurance with respect to transitory and permanent income shocks for different households. The lack of income-consumption data in the US surveys forces researchers to use an empirical strategy to impute consumption. We avoid this procedure by using the Spanish Continuous Family Expenditure Survey that contains good quality income and consumption information in the same survey. We find full insurance for transitory income shocks and partial insurance for permanent shocks for some sub-groups. For the full sample, a 10 percent permanent income shock induces a 7.8 percent permanent change in consumption, with higher insurance capacity for home-owners and more educated households.
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  • José Casado, 2011. "From income to consumption: measuring households partial insurance," Empirical Economics, Springer, vol. 40(2), pages 471-495, April.
    • Handle: RePEc:spr:empeco:v:40:y:2011:i:2:p:471-495
    DOI: 10.1007/s00181-010-0337-z
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    Cited by:

    1. Rosa Martínez & Carolina Navarro, 2016. "Has the Great Recession Changed the Deprivation Profile of Low Income Groups? Evidence from Spain," Hacienda Pública Española / Review of Public Economics, IEF, vol. 218(3), pages 79-104, September.
    2. Brindusa Anghel & Henrique Basso & Olympia Bover & José María Casado & Laura Hospido & Mario Izquierdo & Ivan A. Kataryniuk & Aitor Lacuesta & José Manuel Montero & Elena Vozmediano, 2018. "Income, consumption and wealth inequality in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(4), pages 351-387, November.
    3. Josep Pijoan-Mas & Virginia Sanchez-Marcos, 2010. "Spain is Different: Falling Trends of Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 154-178, January.
    4. Petra Gerlach-Kristen & Rossana Merola, 2019. "Consumption and credit constraints: a model and evidence from Ireland," Empirical Economics, Springer, vol. 57(2), pages 475-503, August.
    5. Ramon Ballester & Jackeline Velazco & Ricard Rigall-I-Torrent, 2015. "Effects of the Great Recession on Immigrants’ Household Consumption in Spain," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 123(3), pages 771-797, September.
    6. Jose María Casado, 2018. "The role of the social environment in household consumption decisions in Spain," Economic Bulletin, Banco de España, issue MAR.
    7. Kohei Kubota, 2021. "Partial insurance in Japan," The Japanese Economic Review, Springer, vol. 72(2), pages 299-328, April.
    8. Etheridge, Ben, 2015. "A test of the household income process using consumption and wealth data," European Economic Review, Elsevier, vol. 78(C), pages 129-157.
    9. Jose Maria Casado, 2012. "Consumption partial insurance of Spanish households," Working Papers 1214, Banco de España.

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    More about this item

    Keywords

    Consumption; Income; Insurance; Inequality; D12; D91; I30;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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