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Children, Time Allocation and Consumption Insurance

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  • Richard Blundell
  • Luigi Pistaferri
  • Itay Saporta-Eksten

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

  • Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2017. "Children, Time Allocation and Consumption Insurance," NBER Working Papers 24006, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24006
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    Cited by:

    1. 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.
    2. 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.
    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. 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).
    6. 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.
    7. 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.
    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. Alexandros Theloudis, 2017. "Consumption inequality across heterogeneous families," Working Papers 451, ECINEQ, Society for the Study of Economic Inequality.
    12. Hassani Nezhad, Lena, 2020. "Female Employment and Childcare," IZA Discussion Papers 13839, Institute of Labor Economics (IZA).
    13. Theloudis, Alexandros, 2021. "Consumption inequality across heterogeneous families," European Economic Review, Elsevier, vol. 136(C).

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    More about this item

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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