Husbands Might Really Be That Cheap

In this paper, we study the decision to purchase life insurance as part of a lifecycle plan of consumption, savings, and labor supply. Households are subject to idiosyncratic risk in their labor productivity as well as the composition and size of their family, and respond by accumulating savings, working, and purchasing life insurance to hedeg against death of an adult. Using a calibrated general equilibrium model that matches key facts from the income and wealth distribution, we estimate that consumption-smoothing motives produce excessive LI holdings relative to the data, even when load factors consistent with estimates are introduced