Consumption and labor supply with partial insurance: An analytical framework

By Jonathan Heathcote, Kjetil Storesletten, Giovanni L. Violante. 2014

118 citations recorded by the source corpus.

This paper studies consumption and labor supply in a model where agents have partial insurance and face risk and initial heterogeneity in wages and preferences. Equilibrium allocations and variances and covariances of wages, hours and consumption are solved for analytically. We prove that all parameters of the structural model are identified given panel data on wages and hours, and cross-sectional data on consumption. The model is estimated on US data. Second moments involving hours and consumption show that the rise in wage dispersion in the 1970s was effectively insured by households, while the rise in the 1980s was not.

Subfields: Accounting, Economics and Econometrics, Soil Science

View Paper: https://www.semanticscholar.org/paper/92a20cab2897ce24b796ea277c4385b569341694

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In Accounting

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Eric T. Swanson

Citations in the corpus

Risk Aversion and the Labor Margin in Dynamic Equilibrium Models (2012, methodology): “22 Examples include Lagos and Wright (2005); Khan and Thomas (2008); Bachmann, Caballero, and Engel (2010); and Bachmann and Bayer (2009).”
Inferring Labor Income Risk and Partial Insurance from Economic Choices (2014, background): “Estimating Initial Dispersion in z. Finally, we relax σz0 = 0 and reestimate the benchmark specification with this additional parameter, σz0 .”
Disability Benefits, Consumption Insurance, and Household Labor Supply (2019, unknown): “Disposable Income As in Heathcote et al. (2014) and Blundell et al. (2016b), we approximate the tax-transfer system by specifying flexible functions mapping household earnings into disposable household income (earnings plus transfers minus taxes).”