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Risk-Sharing, Altruism, and the Factor Structure of Consumption

  • Fumio Hayashi
  • Joseph Altonji
  • Laurence Kotlikoff

We consider four models of consumption that differ with respect to efficient risk-sharing and altruism. They range from complete markets with altruism to family risk-sharing. We use a matched sample of parents and independent children available from the Panel Study of Income Dynamics to discriminate between the four models. Our testing procedure is designed to deal with the set of observed independent children being endogenously selected. The combined hypothesis of complete markets and altruism can be decisively rejected, while we fail to reject altruism and hence family risk-sharing for a subset of families.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3834.

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Date of creation: Sep 1991
Date of revision:
Publication status: published as new title, "Risk-Sharing Between and Within Families," Econometrica, March 1996
Handle: RePEc:nbr:nberwo:3834
Note: EFG
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  2. John H. Cochrane, 1988. "A Test of Consumption Insurance," NBER Working Papers 2642, National Bureau of Economic Research, Inc.
  3. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
  4. Sumru Altug & Robert Miller, . "Household Choices in Equilibrium," University of Chicago - Population Research Center 87-8, Chicago - Population Research Center.
  5. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
  6. Wright, Randall D., 1987. "Market structure and competitive equilibrium in dynamic economic models," Journal of Economic Theory, Elsevier, vol. 41(1), pages 189-201, February.
  7. Lars Peter Hansen & Thomas J. Sargent, 1993. "Recursive linear models of dynamic economies," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  8. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  9. Altonji, Joseph G & Siow, Aloysius, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 293-328, May.
  10. Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc.
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