Financing retirement benefits is probably the most significant fiscal challenge that governments in industrial economies will be facing in the next few decades. Social security reform has therefore become an important public policy issue for many countries and various reform proposals have been...

When borrowing is limited by possible insolvency, a higher lower bound for future income affords earlier consumption and higher welfare. Limited opportunities for consumption smoothing also imply that prospects of upward income mobility have smaller beneficial effects for workers whose labor...

This paper uses a seminonparametric model and Consumer Expenditure Survey data to estimate life cycle profiles of consumption, controlling for demographics, cohort and time effects. In addition to documenting profiles for total and nondurable consumption, we devote special attention to the age...

Post-retirement, the model in the main text (published in the Review of Economic Dynamics) reduces to the Merton (1969) problem, which has of course an exact solution. Pre-retirement, however, the agent holds an American option, namely, retire now or keep working. Problems involving American...

Idiosyncratic household income is typically assumed to consist of several components. While the total income is observed and is often modelled as an integrated moving average process, individual components are not observed directly. In the literature, econometricians typically assume that...

This paper studies a quantitative dynamic general equilibrium life-cycle model where parents and their children are linked by bequests, both voluntary and accidental, and by the transmission of earnings ability. This model is able to match very well the empirical observation that households with...

This paper studies the consequences of capital markets liberalization for global imbalances (non-zero foreign asset positions) when countries are heterogeneous in the degree of financial market development. Countries characterized by more advanced financial markets tend to accumulate large...

This paper quantifies the size of precautionary savings implied by a dynamic general equilibrium model with heterogeneous agents when explicitly considering the labor supply decision of households. I find that precautionary savings are smaller than if they were measured by use of a model economy...

We study how credit scoring impacts the ability of individuals to consumption smooth. Our environment has ex-ante heterogeneity of household types. Credit scoring is interpreted as an intermediary's posterior of a household's type conditional on its bankruptcy and borrowing decisions. The...

This paper compares wealth portfolios across countries. The household sector in the US and Canada owns much more financial wealth, and much less housing wealth, than the household sector in most of Europe. We address this fact using a calibrated two sector growth model with endogenous financial...