Heterogeneous Agents’ Financial Decisions and Asset Accumulation

This study develops a life-cycle model to predict an overlapping generations economy comprising heterogeneous agents. In the proposed model, ex-ante heterogeneity involves the work probability, survival rate, subjective discount rate, and intertemporal elasticity of substitution. We observe differences in financial decisions and asset accumulation among heterogeneous agents and calculate aggregate economic variables, such as consumption and capital, in equilibrium. In a numerical example, we classify the population into four groups according to labor productivity and gender, and investigate the life-cycle behaviors of heterogeneous agents. We find that retired women with the highest labor productivity have the lowest consumption propensity and consumption per capita as they have longer life expectancies than other retirees. Our findings also show that male workers with the highest labor productivity have the lowest risk adjustment factor, indicating that their concerns about retirement risk are lower than those of other workers