Working Paper: CEPR ID: DP3924
Authors: Luis Cubeddu; Josvctor Rosrull
Abstract: In this Paper we show the quantitative importance of the process that determines changes in family composition to determine the main macroeconomic magnitudes. We do so by modeling family type as a stochastic process that affects households in a way similar to shocks to earnings. Agents respond to these processes by optimally choosing savings. We show that the size of savings differs dramatically depending on the details of the stochastic process. The model is quantitative: its fundamental parameters are estimated using US data.
Keywords: families; savings
JEL Codes: E20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| changes in family composition (J12) | household savings behavior (D14) |
| family structure changes (J12) | economic aggregates (E10) |
| stochastic process governing family structure (J12) | household savings behavior (D14) |
| family instability (e.g., divorce) (J12) | household savings (D14) |
| stable family structures (J12) | savings rates (D14) |