Bank of Lithuania

Public insurance of married versus single households in the US: trends and welfare consequences


Using the March Current Population Survey, I show that over the last two decades, married households in the United States received increasingly more public insurance against labor income risk, whereas the opposite was true for single households. To evaluate the welfare consequences of this trend, I perform a quantitative analysis. As a novel contribution, I expand the standard incomplete markets model à la Aiyagari (1994) to include two groups of households: married and single. The model allows for changes in the marital status of households and accounts for transition dynamics between steady states. I show that the divergent trends in public insurance have a significant detrimental effect on the welfare of both married and single households.

JEL Codes: D52, D60, E21, E62, H31.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania. 

Incomplete markets, welfare, consumption inequality, progressive taxation, insurance