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Intra-Household Insurance and the Intergenerational Transmission of Income Risk

Author

Listed:
  • Francesco Agostinelli

    (University of Pennsylvania)

  • Domenico Ferraro

    (Arizona State University)

  • Xincheng Qiu

    (Arizona State University)

  • Giuseppe Sorrenti

    (University of Amsterdam)

Abstract

This paper studies the mechanisms and the extent to which parental wage risk passes through to children’s skill development. Through a quantitative dynamic labor supply model in which two parents choose whether to work short or long hours or not work at all, time spent with children, and child-related expenditures, we find that income risk impacts skill accumulation, permanently lowering children’s skill levels. To the extent that making up for cognitive skill losses during childhood is hard—as available evidence suggests—uninsurable income risk can negatively impact the labor market prospects of future generations.

Suggested Citation

  • Francesco Agostinelli & Domenico Ferraro & Xincheng Qiu & Giuseppe Sorrenti, 2024. "Intra-Household Insurance and the Intergenerational Transmission of Income Risk," Tinbergen Institute Discussion Papers 24-007/V, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20240007
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    References listed on IDEAS

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    1. Orazio Attanasio & Sarah Cattan & Emla Fitzsimons & Costas Meghir & Marta Rubio-Codina, 2020. "Estimating the Production Function for Human Capital: Results from a Randomized Controlled Trial in Colombia," American Economic Review, American Economic Association, vol. 110(1), pages 48-85, January.
    2. Elizabeth M. Caucutt & Lance Lochner & Joseph Mullins & Youngmin Park, 2020. "Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments," NBER Working Papers 27838, National Bureau of Economic Research, Inc.
    3. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2014. "Consumption and Labor Supply with Partial Insurance: An Analytical Framework," American Economic Review, American Economic Association, vol. 104(7), pages 2075-2126, July.
    4. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-253, April.
    5. Jacob Bastian & Lance Lochner, 2022. "The Earned Income Tax Credit and Maternal Time Use: More Time Working and Less Time with Kids?," Journal of Labor Economics, University of Chicago Press, vol. 40(3), pages 573-611.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Wage risk; Household labor supply; Child development; Social insurance;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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