This paper quantifies the macroeconomic implications of the lack of insurance against idiosyncratic labor market risk. I show that in a model economy calibrated to observed individual level data, households make ample use of work effort as a consumption smoothing mechanism. As a consequence,...

This paper quantifies the effects of precautionary savings. It demonstrates that Zeldes' estimate (1989) of excess consumption growth for low asset holders is consistent with a dynamic general equilibrium model with uninsurable endowment shocks when borrowing is constrained at three months'...

In this study, we ask whether the presence of precautionary savings substantially reduces the optimal replacement rate in an European economy type characterized by high unemployment benefits and moral hazard. We build a simple job search model calibrated on French data and, in line with previous...

Starr-McCluer (1996) documented an empirical finding showing that US households covered by health insurance saved more than those without coverage, which is inconsistent with the standard consumption-saving theory. This study conducts a structural analysis and suggests that institutional...