Persistence of Income Shocks and Consumption Inequality: A Case in Japan
Abstract
The present study investigate the relationship between the persistence of uninsurable income shocks and consumption inequality over a household’s life cycle in Japan. Using a life cycle model with incomplete asset markets and calibrated parameters for the Japanese economy, we quantitatively show that moderate persistence of shocks generate a nonlinear consumption inequality profile over the life cycle. The moderate persistence of shocks well replicates the pattern of consumption inequality in Japan.
Type
Publication
Economics Bulletin, Vol. 29, No. 4 pp. 2816-2825, 2009.
