Full Citation

Title: Commitment, Risk, and Consumption: Do Birds of a Feather Have Bigger Nests?

Citation Type: Working Paper

Publication Year: 2005

ISBN: 2158986441

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: We show that incorporating consumption commitments into a standard model of precautionary saving can complicate the usual relationship between risk and consumption. In particular, the presence of plausible adjustment costs can cause a mean-preserving increase in unemployment risk to lead to increased consumption. The predictions of this model are consistent with empirical evidence from dual-earning couples. Couples who share an occupation face increased risk as their unemployment shocks are more highly correlated. Such couples spend more on owner-occupied housing than other couples, spend no more on rent, and are more likely to rent than own. This pattern is strongest when the household faces higher moving costs, or when unemployment insurance provides a less generous safety net.

Url: http://parc.pop.upenn.edu/sites/parc.pop.upenn.edu/files/parc/PARCwps05-02.pdf

User Submitted?: No

Authors: Shore, Stephen H; Sinai, Todd

Series Title: PARC Working Paper Series

Publication Number: 05-02

Institution: University of Pennsylvania

Pages:

Publisher Location: Philadelphia

Data Collections: IPUMS USA

Topics: Housing and Segregation, Labor Force and Occupational Structure

Countries: