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Marital risk and capital accumulation

Author

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  • Luis Cubeddu
  • Jose-Victor Rios-Rull

Abstract

Between the sixties and the late eighties the percentages of low-saving single-parent households and people living alone have grown dramatically at the expense of high-saving married households, while the household saving rate has declined equally dramatically. A preliminary analysis of population composition and savings by household type seems to indicate that about half of the decline in savings is due to demographic change. We construct a model with agents changing marital status, but where the saving behavior of the households can adjust to the properties of the demographic process. We find that the demographic changes that reduce the number of married households (mainly higher divorce and higher illegitimacy) induce all household types to save more and that the effect on the aggregate saving rate is minuscule. We conclude that the drop in savings since the sixties is not due to changes in household composition.

Suggested Citation

  • Luis Cubeddu & Jose-Victor Rios-Rull, 1997. "Marital risk and capital accumulation," Staff Report 235, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:235
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Divorce risk is good for the savings rate
      by Economic Logician in Economic Logic on 2012-02-23 21:53:00

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    Cited by:

    1. Luis M. Cubeddu, 1996. "The intra-generational redistributive effects of social security," Economics Working Papers 168, Department of Economics and Business, Universitat Pompeu Fabra.
    2. David Domeij & Paul Klein, 2002. "Private Pensions: To What Extent Do They Account for Swedish Wealth Inequality?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 503-534, July.
    3. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009. "Accounting For Changes In The Homeownership Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, August.
    4. Libertad González & Berkay Özcan, 2013. "The Risk of Divorce and Household Saving Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 404-434.
    5. Yunhee Chang & Ki Lee, 2006. "Household Debt and Marital Instability: Evidence from the Korean Labor and Income Panel Study," Journal of Family and Economic Issues, Springer, vol. 27(4), pages 675-691, December.
    6. Aiyagari, S. Rao & Greenwood, Jeremy & Seshadri, Ananth, 2002. "Efficient Investment in Children," Journal of Economic Theory, Elsevier, vol. 102(2), pages 290-321, February.
    7. John Knowles & Nezih Guner, 2007. "Marital Instability and the Distribution of Wealth," 2007 Meeting Papers 785, Society for Economic Dynamics.
    8. Jose-Victor Rios-Rull, 1997. "Computation of equilibria in heterogeneous agent models," Staff Report 231, Federal Reserve Bank of Minneapolis.
    9. Aydogan Ulker, 2009. "Wealth Holdings and Portfolio Allocation of the Elderly: The Role of Marital History," Journal of Family and Economic Issues, Springer, vol. 30(1), pages 90-108, March.
    10. Jose-Victor Rios-Rull, 2001. "The Research Agenda: Determinants of Inequality," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 3(1), November.

    More about this item

    Keywords

    Saving and investment;

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