Many motives for saving a portion of one’s income co-exist and their relative importance changes over the life-cycle. However, most existing work focuses on only one of those motives and makes simplifying assumptions about the other motives so that they can be relegated to the background....

While life-cycle theory makes the clear prediction that people dissave at old-age, this prediction is not at all borne out by the data from many countries. Various suggestions have been made to explain this discrepancy. This paper sheds more light on the effect of the exclusion of...

On average, "young" people underestimate whereas "old" people overestimate their chances to survive into the future. We adopt a Bayesian learning model of ambiguous survival beliefs which replicates these patterns. The model is embedded within a non-expected utility model of life-cycle...

This paper analyzes the macroeconomic effect of population aging on the aggregate demand for goods and services between 2000 and 2040. As the composition of goods and services consumed varies over the life cycle, the aggregate demand structure is likely to change as well when the population is...

One important parameter in the decision process when buying a private annuity is individuals' subjective life expectancy, because it directly influences the expected rate of return. We examine the market for private annuities in Germany and evaluate potential selection effects based on...

Financing pensions in the EU is a challenge. Many EU countries introduced private pension schemes to compensate declining public pension levels due to reforms made necessary by demographic change. In 2001, Germany introduced the Riester pension. Ten years after introduction the prevalence rate...

literature on precautionary saving provides contradictory views on the importance of precautionary saving. The SAVE data offer the possibility to generate some of the frequently used instruments known from the literature in order to measure the extent of precautionary savings. This paper...

Recent theoretical contributions have suggested peer-group effects as a potential explanation for several puzzles in macroeconomics, but their empirical relevance for intertemporal consumption choice is an open question. We derive an extension of the standard life-cycle model that allows for...

Medicare Part D provides prescription drug coverage through Medicare approved plans offered by private insurance companies and HMOs. In this paper, we study the role of current prescription drug use and health risks, related expectations, and subjective factors in the demand for prescription...

This paper investigates consumer expenditures of German households pre- and post-retirement. The widely observed distinct drop in spending upon retirement entry poses an empirical puzzle since life cycle theory predicts smoothing of the marginal utility of consumption over time. As one...