Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108718
Authors: 
Wellschmied, Felix
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 8838
Abstract: 
This paper quantitatively determines the asset limit in income support programs which minimizes consumption volatility in a lifecycle model with incomplete markets and idiosyncratic earnings risk. An asset limit allows allocating transfers to those households with the highest utility gains from extra consumption. Moreover, it serves as substitute for history and age dependent taxation. However, a low limit provides incentives for high school dropouts to accumulate almost no wealth. Consequently, they miss self-insurance and suffer from high consumption volatility. For an unborn, these effects are optimally traded-off with an asset limit of $145000.
Subjects: 
means-tested programs
public insurance
incomplete markets
JEL: 
D91
I38
J26
Document Type: 
Working Paper

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