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This paper provides a life-cycle framework for weighing up the insurance value of disability benefits against the incentive cost. Within this framework, we estimate the life-cycle risks that individuals face in the US, as well as the parameters governing the disability insurance program, using...
Persistent link: https://www.econbiz.de/10012462690
We discuss recent developments in the literature that studies how the dynamics of earnings and wages affect consumption choices over the life cycle. We start by analyzing the theoretical impact of income changes on consumption - highlighting the role of persistence, information, size and...
Persistent link: https://www.econbiz.de/10012462738
We propose a new approach to identify the strength of the precautionary motive and the extent of self-insurance in response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative data and instrument consumption and earnings volatility...
Persistent link: https://www.econbiz.de/10012455500
Assessing the importance of uninsurable wage risk for individual financial choices faces two challenges. First, the identification of the marginal effect requires a measure of at least one component of risk that cannot be diversified or avoided. Moreover, measures of uninsurable wage risk must...
Persistent link: https://www.econbiz.de/10012455797