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Title: Families as Shocks

Author(s): Luis Cubeddu and José-Víctor Ríos-Rull

Publication Date: June 2003

Keyword(s): families and savings

Programme Area(s): International Macroeconomics

Abstract: In this Paper we show the quantitative importance of the process that determines changes in family composition to determine the main macroeconomic magnitudes. We do so by modeling family type as a stochastic process that affects households in a way similar to shocks to earnings. Agents respond to these processes by optimally choosing savings. We show that the size of savings differs dramatically depending on the details of the stochastic process. The model is quantitative: its fundamental parameters are estimated using US data.

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Bibliographic Reference

Cubeddu, L and Ríos-Rull, J. 2003. 'Families as Shocks'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3924