Consumption Inequality and Family Labor Supply

75 Pages Posted: 6 Oct 2012 Last revised: 27 May 2023

See all articles by Richard W. Blundell

Richard W. Blundell

UCL; Centre for Economic Policy Research (CEPR)

Luigi Pistaferri

Centre for Economic Policy Research (CEPR); Stanford University

Itay Saporta Eksten

Tel Aviv University - Eitan Berglas School of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: October 2012

Abstract

In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labor supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non-separability and asset accumulation decisions. We show how the model can be estimated and identified using panel data for hours, earnings, assets and consumption. We focus on the importance of family labour supply as an insurance mechanism to wage shocks and find strong evidence of smoothing of males and females permanent shocks to wages. Once family labor supply, assets and taxes are properly accounted for their is little evidence of additional insurance.

Suggested Citation

Blundell, Richard W. and Pistaferri, Luigi and Pistaferri, Luigi and Saporta Eksten, Itay, Consumption Inequality and Family Labor Supply (October 2012). NBER Working Paper No. w18445, Available at SSRN: https://ssrn.com/abstract=2157888

Richard W. Blundell (Contact Author)

UCL ( email )

Department of Economics
Gower Street
London, WC1E 6BT
United Kingdom
+44 20 7504 5863 (Phone)
+44 20 7916 2773 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctp39a/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Luigi Pistaferri

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Stanford University ( email )

Stanford, CA 94305
United States

Itay Saporta Eksten

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

HOME PAGE: http://www.tau.ac.il/~itaysap/

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
32
Abstract Views
654
PlumX Metrics