Precautionary Savings or Working Longer Hours?

No 350, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: This paper quantifies the size of precautionary savings implied by a dynamic general equilibrium model with heterogeneous agents when explicitly considering the labor supply decision of households. I find that precautionary savings are smaller than if they were measured by use of a model economy without labor decision and that they can even be negative. In addition, the incomplete markets economy is smaller in size than its complete markets counterparts: aggregate output in the incomplete markets economy is between 82% and 94% of aggregate output in the complete markets economies. These result are in stark contrast to the ones implied by models without labor choice and are due to the importance of hours as a mechanism to confront wage fluctuations

Keywords: Incomplete Markets; Precautionary Savings; Labor Supply (search for similar items in EconPapers)
JEL-codes: D31 E21 J22 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (36)

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Related works:
Journal Article: Precautionary Savings or Working Longer Hours? (2006)
Working Paper: Precautionary Savings or Working Longer Hours? (2005)
Working Paper: Precautionary Savings or Working Longer Hours? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:350

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