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The Saving Behaviour of a Two Person Household

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  • Martin Browning

    (Institute of Economics, University of Copenhagen)

Abstract

Wives are typically younger than their husbands and women typically live longer than men. These two facts mean that for a typical married couple, wives have more incentive to save for old age than do husbands. This paper presents a theoretical model of the determination of household saving and portfolio choice taking into account differences in preferences for saving. The model is a non-cooperative game in which each person can use their own current income to contribute to current (household) consumption or to a range of assets. The results derived are in marked contrast to 'unitary' models of intertemporal allocation that assume a single household utility function and conclude that saving is unaffected by the distribution of income within the household. The most important result is that the level and the composition (portfolio) of savings and the time path of consumption is highly dependent on the distribution of income within the household. It is also shown that the introduction of an actuarially fair state pension scheme may have non-neutral effects on saving. Finally it is shown that households may invest in both an annuity and insurance for the same person which is not possible in a unitary model.

Suggested Citation

  • Martin Browning, 1994. "The Saving Behaviour of a Two Person Household," Discussion Papers 96-09, University of Copenhagen. Department of Economics, revised Jan 1996.
  • Handle: RePEc:kud:kuiedp:9609
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    References listed on IDEAS

    as
    1. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
    2. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-1096, December.
    3. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
    4. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-467, June.
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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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