NONLINEAR HOUSEHOLD EARNINGS DYNAMICS, SELF-INSURANCE, AND WELFARE

• 成果类型: Article
• 署名作者: De Nardi, Mariacristina; Fella, Giulio; Paz-Pardo, Gonzalo
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; University of London; University College London; University of London; Queen Mary University London
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1093/jeea/jvz010
• 发表日期: 2020
• 页码: 890-926
• 关键词: consumption inequality; intertemporal choice; wealth inequality; income shocks; RISK

摘要

Earnings dynamics are much richer than typically assumed in macro models with heterogeneous agents. This holds for individual-pre-tax and household-post-tax earnings and across administrative and survey data. We estimate two alternative processes for household after-tax earnings and study their implications using a standard life-cycle model. Both processes feature a persistent and a transitory component, but although the first one is the canonical linear process with stationary shocks, the second one has substantially richer earnings dynamics, allowing for age-dependence of moments, non-normality, and nonlinearity in previous earnings and age. Allowing for richer earnings dynamics implies a substantially better fit of the evolution of cross-sectional consumption inequality over the life cycle and of the individual-level degree of consumption insurance against persistent earnings shocks. The richer earnings process implies lower welfare costs of earnings risk.