Working Paper Revision
Why Do Households Save and Work?
Abstract: This paper quantifies why households save and work using a life-cycle model that incorporates wage risk, endogenous labor supply of both spouses, marital transitions, health, medical expenses, mortality and bequest motives at the death of the first and last household member. We estimate it using PSID and HRS data and conduct counterfactuals to assess the quantitative role of individual mechanisms. Precautionary saving against wage risk is smaller than in models that abstract from labor supply and within-household insurance. Bequest motives and medical expenses remain important drivers of wealth, while marriage and divorce generate large but offsetting effects across household types.
JEL Classification: E20; I1; J0;
https://doi.org/10.24149/wp2526r1
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Bibliographic Information
Provider: Federal Reserve Bank of Dallas
Part of Series: Working Papers
Publication Date: 2026-02-09
Number: 2526
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- Working Paper Revision (2026-02-09) : You are here.
- Working Paper Original (2025-07-15) : Why Do Households Save and Work?