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Life Cycle Time Allocation and Saving in an Imperfect Capital Market

Author

Listed:
  • Apps, Patricia

    (University of Sydney)

  • Rees, Ray

    (University of Munich)

Abstract

This paper combines income and expenditure with time use data to provide a unique picture of the time paths of labour supplies, saving and full consumption for two-adult households over the life cycle. These data are used to test the life cycle model presented in the paper, at the core of which is the hypothesis that households face a borrowing interest rate that rises sharply with the amount of non collateral based borrowing. The household members jointly choose time paths of time use, consumption and saving over their life cycle in the face of this capital market imperfection. This model explains the data much better than does the alternative hypothesis of a perfect capital market. Finally, households are shown to differ significantly in their saving behaviour in a way that depends on secondary earner labour supply, with a strong positive association between saving and the secondary earner’s income.

Suggested Citation

  • Apps, Patricia & Rees, Ray, 2004. "Life Cycle Time Allocation and Saving in an Imperfect Capital Market," IZA Discussion Papers 1036, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp1036
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    Cited by:

    1. Arie ten Cate, 2007. "Modelling the reporting discrepancies in bilateral data," CPB Memorandum 179.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Frank van Erp & Paul de Hek, 2009. "Analyzing labour supply of elderly people: a life-cycle approach," CPB Document 179, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Honekamp, Ivonne, 2008. "Effizienz der staatlichen Riester-Förderung - Eine empirische Analyse mit dem Sozio-oekonomischen Panel (SOEP) [Effectiveness of the public Riester subsidies - An empirical analysis using the Socio-Economic Panel (SOEP)]," MPRA Paper 27020, University Library of Munich, Germany.
    4. Mauro Mastrogiacomo & Nicole Bosch, 2011. "Tax credits, labour participation and home production in the Netherlands," Applied Economics, Taylor & Francis Journals, vol. 43(23), pages 3115-3128.
    5. Frank van Erp & Paul de Hek, 2009. "Analyzing labour supply of elderly people: a life-cycle approach," CPB Document 179.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Rob Euwals & Annemiek van Vuren & Daniel van Vuuren, 2011. "The impact of reforms on labour market exit probabilities," CPB Discussion Paper 179.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    Keywords

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    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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