Income risk and consumption inequality: A simulation study

Arbeitspapier

This paper assesses the accuracy of decomposing income risk into permanent and transitory components using income and consumption data. We develop a specific approximation to the optimal consumption growth rule and use Monte Carlo evidence to show that this approximation can provide a robust method for decomposing income risk. The availability of asset data enables the use of a more accurate approximation allowing for partial self-insurance against permanent shocks. We show that the use of data on median asset holdings corrects much of the error in the simple approximation which assumes no self-insurance against permanent shocks.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IFS Working Papers ; No. 04/26

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models; Multiple Variables: General ; Incomplete Markets ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Thema: income risk ; inequality ; approximation methods ; consumption ; Einkommen ; Risiko ; Einkommensverteilung ; Simulation ; Monte-Carlo-Methode

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Blundell, Richard W. ; Low, Hamish ; Preston, Ian
• Ereignis: Veröffentlichung
• (wer): Institute for Fiscal Studies (IFS)
• (wo): London
• (wann): 2004

Weitere Informationen

• DOI: doi:10.1920/wp.ifs.2004.0426
• Handle: http://hdl.handle.net/10419/71490
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ