Content area
Abstract
This dissertation comprises three essays that are linked by their focus on inequality and risk-sharing over the lifecycle.
In Chapter 1, "Inequality and the Lifecycle", I assess whether individual productivity shocks can account for observed lifecycle patterns of inequality in wages, labor supply and consumption, when the only available risk-sharing mechanism is self-insurance through borrowing and savings.
In Chapter 2, "How Much Insurance In Bewley Models?", I use the same environment to compare households' consumption responses to income shocks, to corresponding evidence from US data. A finding that emerges from these first two chapters is that in the data, younger households have access to more insurance channels than this class of models predicts.
In Chapter 3, "Moving Back Home: Insurance Against Labor Market Risk", I delve deeper into the micro-foundations of the additional insurance possibilities observed for young workers, by focusing on one informal insurance channel that can shed light on observed behavior of young adults: the option to live with their parents. I construct a new panel data set of parent-youth coresidence and document an empirical relationship between youths' movements in and out of their parents' homes and idiosyncratic labor market events. I then use this dataset to estimate the structural parameters of a model of parent-youth coresidence, financial transfers, labor supply and savings. On the basis of simulations from this model, I argue that the option to move in and out of the parental home is a quantitatively valuable channel of insurance against labor market risk for low-skilled workers.
