a column by Richard Blundell, Luigi Pistaferri and Itay Saporta Eksten for VOX: CEPR’s Policy Portal
Households can insure their living standards against shocks to wages or employment through the allocation of goods and time. This column presents a model for couples’ decisions on how much to consume or save and how to allocate their available time to three activities – work, leisure, and the care of children – and uses the model to simulate behaviour in response to new policies. The results suggest that the reduction of the mother's childcare time should be an important part of any analysis of the consequences of policies or external shocks that incentivise mothers with young children into work.
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