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Heterogeneity and Persistence in Returns to Wealth

Fagereng, Andreas - 2018

We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population … of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are … positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the …

Persistent link: https://www.econbiz.de/10012913195

Should Income Inequality Be Praised? Multiple Public Goods Provision, Income Distribution and Social Welfare

Itaya, Jun-ichi - 2017

We investigate how income inequality affects social welfare in a model of voluntary contributions to multiple pure public goods. Itaya, de Meza, and Myles (1997) show that the maximization of social welfare precludes income equality in a single pure public good model. In contrast, we show that...

Persistent link: https://www.econbiz.de/10012965708

Once Upon a Time Preference - How Rationality and Risk Aversion Change the Rationale for Discounting

Traeger, Christian P. - 2012

The paper develops an axiomatic framework for rational decision making. The von Neumann-Morgenstern axioms give rise to a richer risk attitude than that captured in the standard discounted expected utility model. I derive three models that permit a more comprehensive risk evaluation. These...

Persistent link: https://www.econbiz.de/10013107349

Estimating Individual Ambiguity Aversion : A Simple Approach

Gneezy, Uri; Imas, Alex; List, John A. - 2021

We introduce a simple, easy to implement instrument for jointly eliciting risk and ambiguity attitudes. Using this instrument, we structurally estimate a two-parameter model of preferences. Our findings indicate that ambiguity aversion is significantly overstated when risk neutrality is assumed....

Persistent link: https://www.econbiz.de/10013315553

How Changing Prudence and Risk Aversion Affect Optimal Saving

Bauer, Christian; Buchholz, Wolfgang - 2021

We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate and the pure time discount rate, there is...

Persistent link: https://www.econbiz.de/10013316461

The Value of a Statistical Life Under Ambiguity Aversion

Treich, Nicolas - 2021

We show that ambiguity aversion increases the value of a statistical life as soon as the marginal utility of wealth is …

Persistent link: https://www.econbiz.de/10013316532

Why Uncertainty Matters - Discounting Under Intertemporal Risk Aversion and Ambiguity

Traeger, Christian P. - 2012

Uncertainty has an almost negligible impact on project value in the economic standard model. I show that a comprehensive evaluation of uncertainty and uncertainty attitude changes this picture fundamentally. The analysis relies on the discount rate, which is the crucial determinant in balancing...

Persistent link: https://www.econbiz.de/10013110758

Application of Stochastic Optimal Control to Financial Market Debt Crises

Stein, Jerome L. - CESifo - 2009

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

Persistent link: https://www.econbiz.de/10005094473

'Ito's Lemma' and the Bellman Equation for Poisson Processes : An Applied View

Sennewald, Ken; Wälde, Klaus - 2021

Using the Hamilton-Jacobi-Bellman equation, we derive both a Keynes-Ramsey rule and a closed form solution for an optimal consumption-investment problem with labor income. The utility function is unbounded and uncertainty stems from a Poisson process. Our results can be derived because of the...

Persistent link: https://www.econbiz.de/10013317637

Inherited Wealth and Demographic Aging

Onder, Harun - 2016

The role of inherited wealth in modern economies has increasingly become under scrutiny. This study presents one of the … share of total wealth in a given economy. Thus, aging is not likely to explain a recent surge in this share in some advanced …

Persistent link: https://www.econbiz.de/10012985794

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