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Family Labor Supply and Aggregate Saving

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  • Santos Monteiro, Paulo

    (University of Warwick)

Abstract

I study the impact of idiosyncratic risk on savings and employment in a small open economy populated by two-member families. Families incur a fixed cost of participation when both members are employed. Because of market incompleteness and information asymmetries, this cost coupled with labor market frictions can generate multiple equilibria. In particular, there might be one equilibrium with high employment and low saving and another one with low employment and high saving. The model predicts that aggregate saving and employment rates are negatively correlated across countries. I present empirical evidence that supports the general equilibrium prediction of the model

Suggested Citation

  • Santos Monteiro, Paulo, 2008. "Family Labor Supply and Aggregate Saving," The Warwick Economics Research Paper Series (TWERPS) 875, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:875
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp_875.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Saving ; Employment ; Family labor supply ; Multiple equilibria;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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