Santos-Monteiro, Paulo (2008) Family labor supply and aggregate saving. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers.

Preview

PDF WRAP_Monieiro_twerp_875.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (211Kb)

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.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HQ The family. Marriage. Woman H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Saving and investment, Macroeconomics, Labor supply, Information asymmetry
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	23 October 2008
Number:	No.875
Number of Pages:	30
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Fundação para a Ciência e a Tecnologia (FCT)
References:	[1] D. Acemoglu and J. Pischki, Why do firms train? theory and evidence, The Quarterly Journal of Economics, 113 (1998), pp. 78–118. [2] S. R. Aiyagari, Uninsured idiosyncratic risk and aggregate saving, The Quarterly Journal of Economics, 109 (1994), pp. 659–684. [3] M. Arellano and S. Bond, Some tests of specification for panel data: Monte carlo evidence and an application to employment equations, Review of Economic Studies, 58 (1991), pp. 277–97. [4] S. B. Aruoba, J. Fernandez-Villaverde, and J. F. Rubio-Ramirez, Comparing solution methods for dynamic equilibrium economies, Journal of Economic Dynamics and Control, 30 (2006), pp. 2477–2508. [5] O. Attanasio, H. Low, and V. Snchez-Marcos, Female labor supply as insurance against idiosyncratic risk, Journal of the European Economic Association, 3 (2005), pp. 755–764. [6] F. D. Blau and L. M. Kahn, Understanding international differences in the gender pay gap, Journal of Labor Economics, 21 (2003), pp. 106–144. [7] C. D. Carroll, Theoretical foundations of buffer stock saving. NBER Working Paper Number, Oct 2004. [8] Y. Chang and S.-B. Kim, From individual to aggregate labor supply: A quantitative analysis based on a heterogeneous agent macroeconomy, International Economic Review, 47 (2006), pp. 1–27. [9] J.-O. Cho and R. Rogerson, Family labor supply and aggregate fluctua- tions, Journal of Monetary Economics, 21 (1988), pp. 233–245. [10] J. F. Cogan, Fixed costs and labor supply, Econometrica, 49 (1981), pp. 945– 963. [11] S. M. Dynarski and J. Gruber, Can families smooth variable incomes?, Brookings Papers on Economic Activity, (1997). [12] S. Edwards, Why are saving rates so different across countries?: An inter- national comparative analysis. NBER Working Papers, Apr 1995. [13] P. Garibaldi and E. Wasmer, Equilibrium search unemployment, endoge- nous participation, and labor market flows, Journal of the European Economic Association, 3 (2005), pp. 851–882. [14] J. Gomes, J. Greenwood, and S. Rebelo, Equilibrium unemployment, Journal of Monetary Economics, 48 (2001), pp. 109–152. [15] P. Gomme, P. Rupert, R. Rogerson, and R. Wright, The business cycle and the life cycle, NBER Macro Annual, NBER, 2004. [16] H. A. Hopenhhayn and J. P. Nicolini, Optimal unemployment insurance, Journal of Political Economy, 105 (1997), pp. 412–438. [17] M. Huggett, The risk-free rate in heterogeneous-agent incomplete-insurance economies, Journal of Economic Dynamics and Control, 17 (1993), pp. 953– 969. [18] T. Jappelli and M. Pagano, Saving, growth, and liquidity constraints, The Quarterly Journal of Economics, 109 (1994), pp. 83–109. [19] L. E. Jones, R. E. Manuelli, and E. R. McGrattan, Why are mar- ried women working so much?, Staff Report 317, Federal Reserve Bank of Minneapolis, Jun 2003. [20] R. Lentz and T. Tranas, Job search and savings: Wealth effects and du- ration dependence, Journal of Labor Economics, 23 (2005), pp. v–394. [21] H. Low, Self-insurance in a life-cycle model of labor supply and savings, Review of Economic Dynamics, 8 (2005), pp. 945–975. [22] A. Marcet, F. Obiols-Homs, and P. Weil, Incomplete markets, labor supply and capital accumulation, Journal of Monetary Economics, 54 (2007), pp. 2621–2635. [23] C. Phelan and R. M. Townsend, Computing multi-period, information- constrained optima, Review of Economic Studies, 58 (1991), pp. 853–881. [24] J. Pijoan-Mas, Precautionary savings or working longuer hours, Review of Economic Dynamics, 9 (2006), pp. 326–352. [25] G. Tauchen, Finite state markov chain approximations to univariate and vector autoregressions, Economic Letters, 20 (1986), pp. 177–181.
URI:	http://wrap.warwick.ac.uk/id/eprint/1342

Request changes to a record

Actions (login required)

View Item