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Life-cycle Wealth Accumulation and Consumption Insurance

Author

Listed:
  • Claudio Campanale

    (Universidad de Alicante)

  • Marcello Sartarelli

    (Dpto. Fundamentos del Análisis Económico)

Abstract

Households appear to smooth consumption in the face of income shocks much more than implied by life-cycle versions of the standard incomplete market model under reference calibrations. In the current paper we explore in detail the role played by the life-cycle pro¿le of wealth accumulation. We show that a standard model parameterized to match the latter can rationalize between 83 and more than 97 percent of the consumption insurance against permanent earnings shocks empirically estimated by Blundell, Pistaferri and Preston (2008), depending on the tightness of the borrowing limit.

Suggested Citation

  • Claudio Campanale & Marcello Sartarelli, 2018. "Life-cycle Wealth Accumulation and Consumption Insurance," Working Papers. Serie AD 2018-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2018-06
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    References listed on IDEAS

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    More about this item

    Keywords

    precautionary savings; Epstein-Zin; consumption insurance coe¿cients; life-cycle.;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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