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Children, Time Allocation and Consumption Insurance

Author

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  • Blundell, Richard

    (University College London)

  • Pistaferri, Luigi

    (Stanford University)

  • Saporta-Eksten, Itay

    (Tel Aviv University)

Abstract

We consider the life cycle choices 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 also serves the purpose of smoothing marginal utility in response to shocks. We combine data on consumption, spouses' wages, hours of work, and time spent with children to estimate the sensitivity of consumption and time allocation to transitory and permanent wage shocks. These structural parameters describe the ability of household to self-insure in response to shocks. We find that behavioral responses to wage shocks depend on the presence of young children. We also find that labor supply cross-responses depend on three counteracting forces: complementarity of leisure time, substitutability of time in the production of child services, and added worker effects.

Suggested Citation

  • Blundell, Richard & Pistaferri, Luigi & Saporta-Eksten, Itay, 2017. "Children, Time Allocation and Consumption Insurance," IZA Discussion Papers 11237, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11237
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    3. de la Croix, David & Pommeret, Aude, 2021. "Childbearing postponement, its option value, and the biological clock," Journal of Economic Theory, Elsevier, vol. 193(C).
    4. 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.
    5. Job Boerma & Loukas Karabarbounis, 2021. "Inferring Inequality With Home Production," Econometrica, Econometric Society, vol. 89(5), pages 2517-2556, September.
    6. Gathmann, Christina & Huttunen, Kristiina & Jernström, Laura & Sääksvuori, Lauri & Stitzing, Robin, 2020. "In Sickness and in Health: Job Displacement and Health Spillovers in Couples," IZA Discussion Papers 13329, Institute of Labor Economics (IZA).
    7. Hamermesh, Daniel S. & Biddle, Jeff E., 2018. "Taking Time Use Seriously: Income, Wages and Price Discrimination," IZA Discussion Papers 11997, Institute of Labor Economics (IZA).
    8. 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.
    9. 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.
    10. Egor Malkov, 2021. "Welfare Effects of the Labor Income Tax Changes on Married Couples: A Sufficient Statistics Approach," Working Papers 590, ECINEQ, Society for the Study of Economic Inequality.
    11. Spencer Bastani & Lisa Dickmanns & Thomas Giebe & Oliver Gürtler, 2022. "Competition for Promotion Can Induce Household Specialization between Equally Competitive Spouses," CESifo Working Paper Series 9660, CESifo.
    12. Biddle, Jeff E. & Hamermesh, Daniel S., 2020. "Income, wages and household production theory," Economics Letters, Elsevier, vol. 192(C).
    13. Kohei Kubota, 2021. "Partial insurance in Japan," The Japanese Economic Review, Springer, vol. 72(2), pages 299-328, April.
    14. Huihui LI, 2020. "Time Allocation to Housework and Childcare in Japan," Discussion Papers 2023, Graduate School of Economics, Kobe University.
    15. Orazio Attanasio & Peter Levell & Hamish Low & Virginia Sánchez‐Marcos, 2018. "Aggregating Elasticities: Intensive and Extensive Margins of Women's Labor Supply," Econometrica, Econometric Society, vol. 86(6), pages 2049-2082, November.
    16. Theloudis, Alexandros, 2021. "Consumption inequality across heterogeneous families," European Economic Review, Elsevier, vol. 136(C).
    17. Lluis, Stephanie & McCall, Brian, 2022. "Spousal labour supply adjustments to extended benefits weeks: Evidence from Canada," CLEF Working Paper Series 42, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    18. Egor Malkov, 2021. "Welfare Effects of Labor Income Tax Changes on Married Couples: A Sufficient Statistics Approach," Papers 2108.09981, arXiv.org, revised Sep 2021.
    19. Hassani Nezhad, Lena, 2020. "Female Employment and Childcare," IZA Discussion Papers 13839, Institute of Labor Economics (IZA).
    20. Antonio Cutanda & Juan A. Sanchis-Llopis, 2021. "Joint estimation of intertemporal labor and consumption decisions: evidence from Spanish households headed by working men," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 611-629, December.
    21. Ofer Setty & Yaniv Yedid-Levi, 2021. "On the Provision of Unemployment Insurance when Workers are Ex-Ante Heterogeneous," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 664-706.
    22. Gathmann, Christina & Huttunen, Kristiina & Jenström, Laura & Saaksvuori, Lauri & Stitzing, Robin, 2020. "Job Loss and Health Spillovers in the Family," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224634, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    family labor supply; time use; consumption smoothing;
    All these keywords.

    JEL classification:

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

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