Family labor supply,taxation and saving in an imperfect capital market |
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Authors: | Patricia Apps Ray Rees |
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Institution: | (1) University of Sydney Law School, Sydney, NSW, Australia;(2) University of Munich, Munich, Germany |
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Abstract: | This paper combines income and expenditure with time use data to provide a unique picture of the labor supply, household production,
saving and consumption decisions of two-adult households over a life cycle defined in terms of the presence and ages of children.
The study also draws on data for household borrowing and lending, direct and indirect benefits and taxes to calibrate a “family”
life cycle model at the core of which is the hypothesis that households face a borrowing interest rate that rises with the
amount of non-collateral based borrowing. The household members jointly choose time paths of time use, consumption and saving
over their life cycle in the face of this capital market imperfection. Importantly, households are shown to differ significantly
in their saving behavior in a way that depends on secondary earner labor supply, with a strong positive association between
saving and the income of the second earner. The results differ sharply from those of the existing literature. |
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