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Why Do Households Save and Work?

Author

Listed:
  • Margherita Borella
  • Mariacristina De Nardi
  • Fang Yang
  • Johanna P. Torres Chain

Abstract

This paper quantifies why households save and work using a life-cycle model that incorporates wage risk, endogenous labor supply of both spouses, marital transitions, health, medical expenses, mortality, and bequest motives at the death of the first and last household member. We estimate it using PSID and HRS data and conduct counterfactuals to assess the quantitative role of individual mechanisms. Precautionary saving against wage risk is smaller than in models that abstract from labor supply and within-household insurance. Bequest motives and medical expenses remain important drivers of wealth, while marriage and divorce generate large but offsetting effects across household types.

Suggested Citation

  • Margherita Borella & Mariacristina De Nardi & Fang Yang & Johanna P. Torres Chain, 2025. "Why Do Households Save and Work?," NBER Working Papers 33874, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33874
    Note: EFG LS PE
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    Cited by:

    1. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2020. "Saving Motives over the Life-Cycle," MPRA Paper 100208, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • I1 - Health, Education, and Welfare - - Health
    • J0 - Labor and Demographic Economics - - General

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