When the financial positions of pension funds worsen, regulations prescribe that pension funds reduce the gap between their assets (invested contributions) and their liabilities (accumulated pension promises). This paper quantifies the business cycle effects and distributional implications of...

We develop a novel argument why better public information can help countries to insure against idiosyncratic risk. Representative agents of developing and industrial countries receive public and private signals on their future income realization and engage in risk-sharing contracts with limited...

In this paper, we document that households' consumption expenditures crucially depend on their expected earnings - even after controlling for realized earnings, wealth and time-invariant unobserved characteristics such as permanent income and over-confidence. To explain this evidence, we develop...

In this paper, we document that households' consumption expenditures depend on their expected earnings - even after controlling for realized earnings and wealth. To explain this evidence, we develop and structurally estimate a standard-incomplete markets model in which rational households...

We investigate whether US households possess advance information about their future income and what this means for consumption insurance. Based on insights from a theoretical model, we propose a new test to detect advance information, which requires only panel data on consumption and income....

This paper focuses on the role of habit formation in individual preferencesover consumption and saving. We closely relate to Alessie and Lusardi's(1997) model as we estimate a model which is based on their closed-formsolution, where saving is expressed as a function of lagged saving and...

This paper explores the interaction between retirement flexibility and portfolio choice in an overlapping-generations model of a closed economy. Retirement flexibility is often seen as a hedge against capital market risks which justifies more risky asset portfolios. We show, however, that this...

The paper addresses two related issues: the optimal intergenerational sharing of laborproductivity risks, through a Pay-As-You-Go (PAYG) social security, and the mix ofPAYG and savings for retirement provision in a small open economy. It shows that partial contingency of the social security on...