Claudio Campanale (University of Turin)

“Consumption insurance and education: A puzzle?”

Abstract: Households appear to smooth consumption in the face of income shocks much more than implied by life-cycle versions of the standard incomplete market model under reference calibrations. In the current paper we uncover a related puzzle: households with different educational levels show similar insurance against permanent shocks in the model while in the data empirically estimated by Blundell et al. (2008) college educated households seem to smooth consumption much more than high school educated households.