English, Article, Journal or magazine article edition: Household welfare, precautionary saving, and social insurance under multiple sources of risk Ivan Vidangos

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Bookmark: http://trove.nla.gov.au/version/6922
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Household welfare, precautionary saving, and social insurance under multiple sources of risk
Author
  • Ivan Vidangos
Physical Description
  • preprint
Notes
  • This paper assesses the quantitative importance of a number of sources of income risk for household welfare and precautionary saving. To that end I construct a lifecycle consumption model in which household income is subject to shocks associated with disability, health, unemployment, job changes, wages, work hours, and a residual component of household income. I use PSID data to estimate the key processes that drive and affect household income, and then use the consumption model to: (i) quantify the welfare value to consumers of providing full, actuarially fair insurance against each source of risk and (ii) measure the contribution of each type of shock to the accumulation of precautionary savings. I find that the value of fully insuring disability, health, and unemployment shocks is extremely small (well below 1/​10 of 1 percent of lifetime consumption in the baseline model). The gains from insuring shocks to the wage and to the residual component of household income are significantly larger (above 1% and 2% of lifetime consumption, respectively). These two shocks account for more than 60% of precautionary wealth.
  • RePEc:fip:fedgfe:2009-14
Language
  • English
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