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Children, time allocation and consumption insurance

Author

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  • Richard Blundell

    (Institute for Fiscal Studies and Institute for Fiscal Studies and University College London)

  • Luigi Pistaferri

    (Institute for Fiscal Studies and Stanford University)

  • Itay Saporta-Eksten

    (Institute for Fiscal Studies)

Abstract

We consider the life-cycle problem of a household that in each period decides how much to consume and how to allocate spouses’ time to work, leisure, and childcare. In an environment with uncertainty, the allocation of goods and time over the life cycle plays the further role of providing insurance against shocks. We use longitudinal data on consumption, and husband and wife separate information on hourly wages, hours of work, and time spent with children to estimate structural parameters measuring the sensitivity of consumption and time allocation choices to transitory and permanent wage shocks. These structural parameters provide a full picture regarding the ability of household to smooth marginal utility in response to shocks. In addition, information on hours of work and hours spent on childcare allows to decompose overall Frisch response into two components, one reflecting the degree of complementarity between husband’s and wife’s leisure ("companionship" or "love") and another reflecting the degree of substitutability of their childcare time in the production of childcare services.

Suggested Citation

  • Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2015. "Children, time allocation and consumption insurance," IFS Working Papers W15/13, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:15/13
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    References listed on IDEAS

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    1. Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2018. "Children, Time Allocation, and Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 126(S1), pages 73-115.
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    Cited by:

    1. Martin Halla & Julia Schmieder & Andrea Weber, 2020. "Job Displacement, Family Dynamics, and Spousal Labor Supply," American Economic Journal: Applied Economics, American Economic Association, vol. 12(4), pages 253-287, October.
    2. Andrea Ichino & Martin Olsson & Barbara Petrongolo & Peter Skogman Thoursie, 2019. "Economic incentives, home production and gender identity norms," CEP Discussion Papers dp1626, Centre for Economic Performance, LSE.
    3. Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2018. "Children, Time Allocation, and Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 126(S1), pages 73-115.
    4. Mette Ejrnæs & Thomas H. Jørgensen, 2020. "Family planning in a life‐cycle model with income risk," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(5), pages 567-586, August.
    5. de la Croix, David & Pommeret, Aude, 2021. "Childbearing postponement, its option value, and the biological clock," Journal of Economic Theory, Elsevier, vol. 193(C).
    6. Gathmann, Christina & Huttunen, Kristiina & Jernström, Laura & Sääksvuori, Lauri & Stitzing, Robin, 2020. "In Sickness and in Health: Job Displacement and Health. Spillovers in Couples," Working Papers 133, VATT Institute for Economic Research.
    7. Alexandros Theloudis, 2017. "Consumption inequality across heterogeneous families," Working Papers 451, ECINEQ, Society for the Study of Economic Inequality.
    8. Biddle, Jeff E. & Hamermesh, Daniel S., 2020. "Income, wages and household production theory," Economics Letters, Elsevier, vol. 192(C).
    9. Kohei Kubota, 2021. "Partial insurance in Japan," The Japanese Economic Review, Springer, vol. 72(2), pages 299-328, April.
    10. Huihui LI, 2020. "Time Allocation to Housework and Childcare in Japan," Discussion Papers 2023, Graduate School of Economics, Kobe University.
    11. Hassani Nezhad, Lena, 2020. "Female Employment and Childcare," IZA Discussion Papers 13839, Institute of Labor Economics (IZA).
    12. Neil Amin‐Smith & Orazio P. Attanasio, 2020. "Consumption and Wage Inequality in the US: The Dynamics of the Last Three Decades," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 7-38, March.

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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