Life Insurance and Household Consumptionhttp://dx.doi.org/10.1257/aer.102.7.3701
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
U.S. 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.
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