Download or read book Consumption and Risk Sharing Over the Life Cycle written by Kjetil Storesletten and published by . This book was released on 2000 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: A striking feature of U.S. data on income and consumption is that inequality increases with age. Using both panel data and an equilibrium life cycle model, we argue that this is informative for understanding the importance and the characteristics of idiosyncratic labor market risk. We find that uncertainty distributed throughout the working years accounts for 40 percent of life time uncertainty, with the remainder being realized prior to entering the labor market. We estimate that the shocks received over the life cycle contain a highly persistent component, with an autocorrelation coefficient between 0.98 and unity. The joint behavior of earnings and consumption inequality, interpreted using our model, adds to the body of evidence suggesting that labor market risks are imperfectly pooled and that a precautionary motive is an important aspect of U.S. savings behavior. The restrictions imposed by general equilibrium theory play an important role in arriving at each of these conclusions

Download or read book Consumption and Risk Sharing Over the Life Cycle written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The National Bureau of Economic Research, Inc. offers an abstract of the November 2000 working paper entitled "Consumption and Risk Sharing Over the Life Cycle," written by Kjetil Storesletten, Chris I. Telmer, and Amir Yaro. The full text may be purchased online. This paper examines the joint behavior of earnings and consumption using an equilibrium life cycle model. The authors find that uncertainty distributed throughout the working years accounts for 40 percent of life time uncertainty, with the remainder being realized prior to entering the labor market.

Download or read book Cross country Consumption Risk Sharing a Long run Perspective written by Mr.Zhaogang Qiao and published by International Monetary Fund. This book was released on 2010-03-01 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates an empirical nonstationary panel regression model that tests long-run consumption risk sharing across a sample of OECD and emerging market (EM) countries. This is in contrast to the existing literature on consumption risk sharing, which is mainly about risks at business cycle frequency. Since our methodology focuses on identifying cointegrating relationships while allowing for arbitrary short-run dynamics, we can obtain a consistent estimate of long-run risk sharing while disregarding any short-run nuisance factors. Our results show that long-run risk sharing in OECD countries increased more than that in EM countries during the past two decades.

Download or read book Risky Habits written by Jeffrey C. Fuhrer and published by . This book was released on 1998 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard international economic models with life cycle/permanent income consumption behavior predict that international portfolio diversification leads to high bilateral consumption correlations. Thus international consumption correlations have been empirically estimated as a test of international portfolio diversification and risk sharing. In this paper we investigate the international consumption correlations generated by a more general model which incorporates habit formation in consumption. We show that, in the presence of common interest rate movements, habit formation itself can generate positive international consumption correlations even in the absence of any international risk sharing. Empirical evidence presented in this paper suggests habit formation characterizes consumption behavior among most of the G-7 countries. Thus, the extent of international portfolio diversification may be even lower than that suggested by previous research which studied international consumption correlations.

Download or read book Social Security and Inequality Over the Life Cycle written by Angus Deaton and published by . This book was released on 2000 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the consequences of social security reform for the inequality of consumption across individuals. The idea is that inequality is at least in part the result of individual risk in earnings or asset returns, the effects of which accumulate over time to increase inequality within groups of people as they age. Institutions such as social security, that share risk across individuals, will moderate the transmission of individual risk into inequality. We examine how different social security systems, with different degrees of risk sharing, affect consumption inequality. We do so within the framework of the permanent income hypothesis, and also using richer models of consumption that incorporate precautionary saving motives and borrowing restrictions. Our results indicate that systems in which there is less sharing of earnings risk such as systems of individual accounts produce higher consumption inequality both before and after retirement. However, differences across individuals in the rate of return on assets (including social security assets held in individual accounts) produce only modest additional effects on inequality

Download or read book International Consumption Risk Sharing written by Fabio Canova and published by . This book was released on 1993 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Consumption Over the Life Cycle written by Pierre-Olivier Gourinchas and published by . This book was released on 1999 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper employs a synthetic cohort technique and Consumer Expenditure Survey data to construct average age-profiles of consumption and income over the working lives of typical households across different education and occupation groups. Using these profiles, we estimate a structural model of optimal life-cycle consumption expenditures in the presence of realistic labor income uncertainty. The model fits the profiles quite well. In addition to providing tight estimates of the discount rate and risk aversion, we find that consumer behavior changes strikingly over the life-cycle. Young consumers behave as buffer-stock agents. Around age 40, the typical household starts accumulating liquid assets for retirement, and its behavior mimics more closely that of a certainty equivalent consumer. This change in behavior is mostly driven by the life-cycle profile of expected income. Our methodology provides a natural decomposition of saving into its precautionary and retirement components.

Download or read book Heterogenous Life cycle Profiles Income Risk and Consumption Inequality written by Giorgio E. Primiceri and published by . This book was released on 2006 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Unequal We Stand written by Jonathan Heathcote and published by DIANE Publishing. This book was released on 2010-10 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors conducted a systematic empirical study of cross-sectional inequality in the U.S., integrating data from various surveys. The authors follow the mapping suggested by the household budget constraint from individual wages to individual earnings, to household earnings, to disposable income, and, ultimately, to consumption and wealth. They document a continuous and sizable increase in wage inequality over the sample period. Changes in the distribution of hours worked sharpen the rise in earnings inequality before 1982, but mitigate its increase thereafter. Taxes and transfers compress the level of income inequality, especially at the bottom of the distribution, but have little effect on the overall trend. Charts and tables. This is a print-on-demand publication; it is not an original.

Download or read book Consumption Over the Life Cycle and Over the Business Cycle written by Orazio P. Attanasio and published by . This book was released on 1993 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main aim of this paper is to assess the validity of the life cycle model of consumption. In particular, we address an issue that has recently received much attention, especially in the macroeconomic literature: that of "excess sensitivity" of consumption growth to income growth. We do this using a time series of cross sections and a novel and flexible parameterization of preferences. The former allows us to' address aggregation issues directly, while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth. The main findings can be summarized as follows: (i) the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables. This is true both at life cycle and business cycle frequencies. (ii) estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables, including the level of consumption. The eis increases with the level of consumption, as expected. (iii) the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle. (iv) we are able to reconcile our results with those reported both in the macro and micro literature. (v) in our specification the elasticity of intertemporal substitution is not very well determined. This result, however, should be taken with care, as we have not made an effort to construct a 'preferred' specification, which would probably include additional controls for labor supply behavior. The evidence presented shows that the life cycle model cannot be easily dismissed. Indeed, we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle.

Download or read book Explaining Consumption written by Tamim Bayoumi and published by International Monetary Fund. This book was released on 1997-05 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: As might be expected from an activity which comprises well over half of aggregate economic spending, the behavior of private consumption remains one of the most important areas of economic research. As yet, however, there is little consensus on how to characterize this behavior empirically, with some investigators focusing on the importance of optimizing behavior in a world with complete markets and infinitely lived consumers, and others on the impact of market imperfections, rules of thumb, and life-cycle effects. This paper provides a way of assessing the relative contribution of these different types of behavior to aggregate consumption.

Download or read book Consumption Risk Sharing Over the Business Cycle written by Mathias Hoffmann and published by . This book was released on 2009 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Choice and Asset Markets written by Sumru Altug and published by . This book was released on 1994 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides thorough models that analyze pricing and costs of all commodities. It considers the consumers' risks and opportunities. The authors begin with the theoretical background and develop the topics by integrating real-world, testable implications. Dynamic Choice and Asset Markets will be of value to students of finance and macroeconomics as well as researchers and economists using asset pricing models.

Download or read book Risk Sharing and Precautionary Saving written by Luigi Guiso and published by . This book was released on 1992 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Earnings Consumption and Lifecycle Choices written by Costas Meghir and published by . This book was released on 2010 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: We discuss recent developments in the literature that studies how the dynamics of earnings and wages affect consumption choices over the life cycle. We start by analyzing the theoretical impact of income changes on consumption - highlighting the role of persistence, information, size and insurability of changes in economic resources. We next examine the empirical contributions, distinguishing between papers that use only income data and those that use both income and consumption data. The latter do this for two purposes. First, one can make explicit assumptions about the structure of credit and insurance markets and identify the income process or the information set of the individuals. Second, one can assume that the income process or the amount of information that consumers have are known and tests the implications of the theory. In general there is an identification issue that is only recently being addressed, with better data or better "experiments". We conclude with a discussion of the literature that endogenize people's earnings and therefore change the nature of risk faced by households.

Download or read book International Risk Sharing in the Short Run and in the Long Run Le Partage Du Risque Dans Le Court Et Le Long Terme written by Marianne Baxter and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: International risk-sharing has far-reaching implications both for economic policy and for basic research in economics. When countries do not share consumption risk, individuals experience consumption fluctuations that are undesirable and possibly unnecessary. We investigate bilateral risk-sharing at short vs. long horizons. We find substantial cross-country consumption correlations at trend and business-cycle frequencies. Correlations are particularly high within Europe. Prior research focused on first-difference correlations, which are typically quite low. We argue that this reflects measurement error. At all horizons, we find that consumption correlations are not significantly different from output correlations, implying a lack of deliberate consumption risk-sharing. Le partage international du risque a de grandes implications à la fois pour la politique économique et pour la recherche économique de base. Quand des pays ne partagent pas les risques de consommation, les individus font l'expérience de fluctuations de consommation indésirables et possiblement non-nécessaires. On examine le partage de risque bilatéral à court et à long terme. On découvre des corrélations entre pays tant au niveau des tendances que des fréquences du cycle d'affaires. Ces corrélations sont particulièrement élevées en Europe. Des travaux antérieurs se sont concentrés sur les corrélations entre premières différences qui sont typiquement assez faibles. On suggère que ces résultats reflètent une erreur de mesure. Pour tous les horizons temporels, on découvre que les corrélations de consommation ne diffèrent pas significativement des corrélations de production - ce qui implique un manque de partage de risque délibéré au niveau de la consommation.

Download or read book Protecting All written by Truman Packard and published by Human Development Perspectives. This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This white paper focusses on the policy interventions made to help people manage risk, uncertainty and the losses from events whose impacts are channeled primarily through the labor market. The objectives of the white paper are: to scrutinize the relevance and effects of prevailing risk-sharing policies in low- and middle-income countries; take account of how global drivers of disruption shape and diversify how people work; in light of this diversity, propose alternative risk-sharing policies, or ways to augment and improve current policies to be more relevant and responsive to peoples' needs; and map a reasonable transition path from the current to an alternative policy approach that substantially extends protection to a greater portion of working people and their families. This white paper is a contribution to the broader, global discussion of the changing nature of work and how policy can shape its implications for the wellbeing of people. We use the term risk-sharing policies broadly in reference to the set of institutions, regulations and interventions that societies put in place to help households manage shocks to their livelihoods. These policies include formal rules and structures that regulate market interactions (worker protections and other labor market institutions) that help people pool risks (social assistance and social insurance), to save and insure affordably and effectively (mandatory and incentivized individual savings and other financial instruments) and to recover from losses in the wake of livelihood shocks ('active' reemployment measures). Effective risk-sharing policies are foundational to building equity, resilience and opportunity, the strategic objectives of the World Bank's Social Protection and Jobs Global Practice. Given failures of factor markets and the market for risk in particular the rationale for policy intervention to augment the options that people have to manage shocks to their livelihoods is well-understood and accepted. By helping to prevent vulnerable people from falling into poverty --and people in the poorest households from falling deeper into poverty-- effective risk-sharing interventions dramatically reduce poverty. Households and communities with access to effective risk-sharing instruments can better maintain and continue to invest in these vital assets, first and foremost, their human capital, and in doing so can reduce the likelihood that poverty and vulnerability will be transmitted from one generation to the next. Risk-sharing policies foster enterprise and development by ensuring that people can take appropriate risks required to grasp opportunities and secure their stake in a growing economy."--