American Economic Review Vol. 102 No. 7 2012

Life Insurance and Household Consumption

Jay H. Hong¹; José-Víctor Ríos-Rull²

¹ Department of Economics, University of Rochester, RC Box 270156, Rochester, NY 14627. · ² Department of Economics, University of Minnesota, 4-101 Hanson Hall, 1925 Fourth St. S., Minneapolis, MN 55455, and Federal Reserve Bank of Minneapolis, CAERP, CEPR, NBER.

Abstract

Using life insurance holdings by age, sex, and marital status, we infer how individuals value consumption in different demographic stages. We estimate equivalence scales and bequest motives simultaneously within a fully specified model where agents face US demographics and save and purchase life insurance. Our findings indicate that individuals are very caring for dependents, that economies of scale are large, that children are very costly (or yield very high marginal utility), that wives with children produce lots of home goods, and that females display habits from marriage, while men do not. These findings contrast sharply with standard equivalence scales.

DOI

10.1257/aer.102.7.3701

Volume

102

Issue

7

Pages

3701-3730

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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