| Title |
Advance information and consumption insurance: evidence and structural estimation |
| Authors |
Pedroni, Marcelo ; Singh, Swapnil ; Stoltenberg, Christian A |
| DOI |
10.1016/j.jmoneco.2025.103748 |
| Full Text |
|
| Is Part of |
Journal of monetary economics.. Amsterdam : Elsevier. 2025, vol. 151, art. no. 103748, p. 1-14.. ISSN 0304-3932. eISSN 1873-1295 |
| Keywords [eng] |
advance information ; consumption insurance ; structural estimation ; income risk ; panel data ; incomplete markets |
| Abstract [eng] |
We show that households’ private information on future income can be identified from the correlation between consumption growth and future income growth conditional on current income growth. Employing PSID data, we find that this conditional correlation is positive and significant. We use this evidence to structurally estimate a standard incomplete markets model and discover that US households possess enough advance information to reduce their income forecast errors by 15%. This significantly affects the measurement of consumption insurance. With advance information, 25% more income shocks pass through to consumption on average, and more than twice as much for the 5% asset poorest. Without advance information, the marginal benefits of public insurance are underestimated by an order of magnitude for some of the poorest wealth quantiles. |
| Published |
Amsterdam : Elsevier |
| Type |
Journal article |
| Language |
English |
| Publication date |
2025 |
| CC license |
|
