Working Paper: NBER ID: w24006
Authors: Richard Blundell; Luigi Pistaferri; Itay Saportaeksten
Abstract: We consider the life cycle choices of a household that in each period decides how much to consume and how to allocate spouses' time to work, leisure, and childcare. In an environment with uncertainty, the allocation of goods and time over the life cycle also serves the purpose of smoothing marginal utility in response to shocks. We combine data on consumption, spouses' wages, hours of work, and time spent with children to estimate the sensitivity of consumption and time allocation to transitory and permanent wage shocks. These structural parameters describe the ability of household to self-insure in response to shocks. We find that behavioral responses to wage shocks depend on the presence of young children. We also find that labor supply cross-responses depend on three counteracting forces: complementarity of leisure time, substitutability of time in the production of child services, and added worker effects.
Keywords: Household Economics; Labor Supply; Consumption Insurance; Childcare
JEL Codes: D15; J13; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| marginal utility of wealth (D11) | allocation of time between work, leisure, and childcare (J22) |
| wage shocks (J31) | household consumption (D10) |
| wage shocks (J31) | time allocation decisions (J29) |
| presence of young children (J13) | labor supply responses to wage changes (J29) |
| presence of young children (J13) | complementarity of leisure time between spouses (D13) |
| presence of young children (J13) | substitutability of time in production of childcare services (J29) |
| female labor supply (J21) | male wage shocks (J31) |
| households' ability to self-insure against wage shocks (G52) | structural parameters (C23) |