TY  - JOUR
AU  - Blundell,Richard
AU  - Pistaferri,Luigi
AU  - Saporta-Eksten,Itay
TI  - Consumption Inequality and Family Labor Supply
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18445
PY  - 2012
Y2  - October 2012
UR  - http://www.nber.org/papers/w18445
L1  - http://www.nber.org/papers/w18445.pdf
N1  - Author contact info:
Richard Blundell
University College London
Department of Economics
Gower Street
London, ENGLAND
E-Mail: r.blundell@ucl.ac.uk

Luigi Pistaferri
Department of Economics
579 Serra Mall
Stanford University
Stanford, CA 94305-6072
Tel: 650/724-4904
Fax: 650/725-5702
E-Mail: pista@stanford.edu

Itay Saporta Eksten
Stanford University
Department of Economics
579 Serra Mall
Stanford CA 94305
E-Mail: isaporta@stanford.edu
AB  - 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.
ER  -