scholarly journals Consumption insurance with advance information

2020 ◽  
Vol 11 (2) ◽  
pp. 671-711
Author(s):  
Christian A. Stoltenberg ◽  
Swapnil Singh
Keyword(s):  
Limited Commitment ◽  
Insurance Markets ◽  
Income Shocks ◽  
Complete Markets ◽  
Consumption Insurance ◽  
Current Consumption ◽  
The Us ◽  
Advance Information ◽  
Future Income ◽  
Saving Decisions

This paper investigates whether assuming that households possess advance information on their income shocks helps to overcome the difficulty of standard models to understand consumption insurance in the US. As our main result, we find that the quantitative relevance of advance information crucially depends on the structure of insurance markets. For a realistic amount of advance information, a complete markets model with endogenous solvency constraints due to limited commitment explains several key consumption insurance measures better than existing models without advance information. In contrast, when advance information is integrated into a standard incomplete markets model, it affects household consumption‐saving decisions too little to bridge the gap between the model and the data and can induce counterfactual correlations between current consumption growth and future income growth.

scholarly journals Corporate governance and managerial opportunism: The case of us pension plans

2009 ◽  
Vol 6 (3) ◽  
pp. 523-530
Author(s):  
Sharad Asthana
Keyword(s):  
Corporate Governance ◽  
Pension Plan ◽  
Pension Plans ◽  
Retirement Benefits ◽  
Managerial Opportunism ◽  
External Monitoring ◽  
The Us ◽  
Us Government ◽  
Future Income ◽  
Empirical Tests

Insuring post-retirement benefits to retirees is a joint responsibility of the employees, employers, and the US government. Managers have been shown to manipulate pension plan reports with the intention of maximizing their own gains to the detriment of current and future retirees. External monitoring by regulators and auditors is effective in curbing this opportunistic behavior. This paper extends these findings to examine if effective internal monitoring in the form of strong corporate governance is instrumental in controlling manipulations of pension reports by managers. Empirical tests support the finding that effective corporate governance is inversely associated with the extent of managerial manipulations in pension plan reporting. This result should be of interest to employees, retirees, and the US Government that are trying to insure the future income of senior citizens.

The Response of Consumption to Unanticipated Changes in Income

2017 ◽  
Author(s):  
Tullio Jappelli ◽  
Luigi Pistaferri
Keyword(s):  
Insurance Markets ◽  
Income Shocks ◽  
Experimental Setting ◽  
Subjective Expectations ◽  
The Third ◽  
Marginal Propensity To Consume ◽  
Quasi Experimental ◽  
Marginal Propensity ◽  
The Impact ◽  
Joint Behavior

In this chapter we examine tests of the hypothesis that consumption will respond to unanticipated income changes and that the response will depend on the persistence of the shock and on the degree of imperfection in the credit and insurance markets. The literature has considered three approaches to estimating the effect of income shocks on consumption, that is, the marginal propensity to consume. One identifies episodes in which income changes unexpectedly and seeks to evaluate, in a quasi-experimental setting, how consumption reacts. A second estimates the marginal propensity to consume with respect to income shocks using the covariance restrictions imposed by theory on the joint behavior of consumption and income growth. The third estimates the impact of shocks by combining realizations and expectations of income or consumption in surveys where data on subjective expectations are available.

scholarly journals Globalization, Trade Imbalances and Labor Market Adjustment

2021 ◽  
Vol 2021 (1310) ◽  
pp. 1-95
Author(s):  
Rafael Dix-Carneiro ◽  
◽  
João Paulo Pessoa ◽  
Ricardo Reyes-Heroles ◽  
Sharon Traiberman ◽  
...  
Keyword(s):  
Labor Market ◽  
Global Economy ◽  
Labor Reallocation ◽  
Trade Shocks ◽  
Market Effects ◽  
Sector Model ◽  
Trade Imbalances ◽  
Long Run ◽  
The Us ◽  
Saving Decisions

We study the role of global trade imbalances in shaping the adjustment dynamics in response to trade shocks. We build and estimate a general equilibrium, multi-country, multi-sector model of trade with two key ingredients: (a) Consumption-saving decisions in each country commanded by representative households, leading to endogenous trade imbalances; (b) labor market frictions across and within sectors, leading to unemployment dynamics and sluggish transitions to shocks. We use the estimated model to study the behavior of labor markets in response to globalization shocks, including shocks to technology, trade costs, and inter-temporal preferences (savings gluts). We find that modeling trade imbalances changes both qualitatively and quantitatively the short- and long-run implications of globalization shocks for labor reallocation and unemployment dynamics. In a series of empirical applications, we study the labor market effects of shocks accrued to the global economy, their implications for the gains from trade, and we revisit the "China Shock" through the lens of our model. We show that the US enjoys a 2.2 percent gain in response to globalization shocks. These gains would have been 73 percent larger in the absence of the global savings glut, but they would have been 40 percent smaller in a balanced-trade world.

scholarly journals JEEA-FBBVA LECTURE 2019: Consumption Insurance in Networks with Asymmetric Information: Evidence from Tanzania

2020 ◽  
Vol 18 (4) ◽  
pp. 1589-1618
Author(s):  
Orazio Attanasio ◽  
Sonya Krutikova
Keyword(s):  
Risk Sharing ◽  
Information Quality ◽  
Income Shocks ◽  
Information Frictions ◽  
Family Networks ◽  
Individual Level ◽  
Consumption Insurance ◽  
Idiosyncratic Shocks ◽  
The Individual

Abstract This paper uses a dataset from Tanzania with information on consumption, income, and income shocks within and across family networks. Crucially and uniquely, it also contains data on the degree of information existing between each pair of households within family networks. We use these data to construct a novel measure of the quality of information both at the level of household pairs and at the level of the network. We also note that the individual level measures can be interpreted as measures of network centrality. We study risk sharing within these networks and explore whether the rejection of perfect risk sharing that we observe can be related to our measures of information quality. We show that households within family networks with better information are less vulnerable to idiosyncratic shocks. Furthermore, we show that more central households within networks are less vulnerable to idiosyncratic shocks. These results have important implications for the characterisation of the empirical failure of the perfect risk-sharing hypothesis and point to the importance of information frictions.

scholarly journals Crisis, Resilience, and Civic Engagement: Pandemic-Era Census Completion

2021 ◽  
pp. 1-18
Author(s):  
Elaine K. Denny
Keyword(s):  
Civic Engagement ◽  
Completion Rates ◽  
Income Shocks ◽  
Representative Survey ◽  
Economic Shocks ◽  
Search Volume ◽  
The Us ◽  
Us Government ◽  
Nationally Representative ◽  
Shed Light

How do economic shocks and financial resilience shape civic engagement, especially for the economically insecure? I turn to the early months of the coronavirus pandemic for insights. In April 2020, with more than 23 million adults unemployed, the US government asked residents to participate in the constitutionally mandated decennial census. I test how variations in income shocks from the shutdown and sources of financial resilience predict disparities in census completion, a civic act designed to minimize participation barriers. First, I use nationally representative survey data to demonstrate that policies that protect the economically vulnerable from the full impacts of economic shocks also predict higher census completion rates. Then, I use Google Trends data to show that high unemployment search volume interacted with low resilience to predict depressed census completion. Findings shed light on how economic crises can widen participation gaps—with representation and resource consequences—and how policies that lessen acute economic shocks may reduce participation disparities.

scholarly journals A Tale of Two Bases: Progressive Taxation of Capital and Labor Income

2021 ◽  
Vol 49 (3) ◽  
pp. 335-391
Author(s):  
Rachel Moore ◽  
Brandon Pecoraro
Keyword(s):  
Labor Income ◽  
Tax Rates ◽  
Capital Income ◽  
Heterogeneous Agent ◽  
Us Economy ◽  
The Us ◽  
Marginal Tax Rates ◽  
Saving Decisions ◽  
Jobs Act ◽  
Modeling Feature

Macroeconomic models routinely abstract simultaneously from two features of the US federal tax code: the joint taxation of ordinary capital and labor income and the special taxation of preferential capital income. In this article, we argue that this abstraction omits a “portfolio-effect” mechanism where endogenous changes to the ordinary-preferential composition of households’ capital income influence individuals’ optimal labor and saving decisions through its impact on their effective marginal tax rates. We demonstrate the quantitative importance of this tax detail by simulating provisions from the recently enacted “Tax Cuts and Jobs Act” using a heterogeneous-agent overlapping generations framework calibrated to the US economy. Our findings imply that accounting for the detailed taxation of labor and capital income should be considered an important modeling feature for tax policy analysis.

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