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Interpreting Life Cycle Inequality Patterns as an Efficient Allocation: Mission Impossible?

Badel, Alejandro; Huggett, Mark - In: Review of Economic Dynamics 17 (2014) 4, pp. 613-629

The life-cycle patterns of consumption, wage and hours inequality observed in U.S. cross-section data are commonly viewed as incompatible with a Pareto efficient allocation. We determine the extent to which these qualitative and quantitative patterns can or cannot be produced by Pareto efficient...

Persistent link: https://www.econbiz.de/10010945607

On the Evolution of the US Consumer Wealth Distribution

Hintermaier, Thomas; Koeniger, Winfried - In: Review of Economic Dynamics 14 (2011) 2, pp. 317-338

. We find that considering a wide range of net worth percentiles for prime-age consumers between ages 26 and 55 delivers … net worth increases with age while the dispersion of net worth falls with age. The model also predicts some of the … dispersion of net worth for all prime-age consumers, while the model does not predict the observed increase of average net worth …

Persistent link: https://www.econbiz.de/10008670383

Preferences for Risk in Dynamic Models with Adjustment Costs

Vereshchagina, Galina - In: Review of Economic Dynamics 17 (2014) 1, pp. 86-106

This paper characterizes the solution to a consumption/savings decision problem in which one of the consumption goods involves transaction costs. It then analyzes how such adjustment costs affect consumers' risk attitudes. Previous studies have suggested that transaction costs, by resulting in...

Persistent link: https://www.econbiz.de/10010729239

Saving Rates and Portfolio Choice with Subsistence Consumption

Achury, Carolina; Hubar, Sylwia; Koulovatianos, Christos - In: Review of Economic Dynamics 15 (2012) 1, pp. 108-126

We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the...

Persistent link: https://www.econbiz.de/10008828681

Search for Financial Returns and Social Security Privatization

McKay, Alisdair - In: Review of Economic Dynamics 16 (2013) 2, pp. 253-270

I develop a general equilibrium model in which the quality of household financial decisions is endogenously determined by the incentives to exert effort in learning about financial opportunities. The model generates predictions for asset market participation and returns across households....

Persistent link: https://www.econbiz.de/10010604555

Bequest Motives and the Annuity Puzzle

Lockwood, Lee - In: Review of Economic Dynamics 15 (2012) 2, pp. 226-243

Few retirees annuitize any wealth, a fact that has so far defied explanation within the standard framework of forward-looking, expected utility-maximizing agents. Bequest motives seem a natural explanation. Yet the prevailing view is that people with plausible bequest motives should annuitize...

Persistent link: https://www.econbiz.de/10008861934

Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution

Pashchenko, Svetlana; Porapakkarm, Ponpoje - In: Review of Economic Dynamics 16 (2013) 3, pp. 383-404

Two key components of the recent U.S. health reform are a new regulation of the individual health insurance market and an increase in income redistribution in the economy. Which component contributes more to the welfare outcome of the reform? We address this question by constructing a general...

Persistent link: https://www.econbiz.de/10010856601

Why Do Some Households Save So Little? A Rational Explanation

Leung, Siu Fai - In: Review of Economic Dynamics 3 (2000) 4, pp. 771-800

This paper offers an explanation for the puzzle of low wealth holdings among a significant fraction of the elderly. Instead of invoking irrational, non-rational, or non-optimal behavior to resolve the puzzle, it is shown that widespread low wealth holdings are consistent with a rational...

Persistent link: https://www.econbiz.de/10005085617

Means Tested Public Assistance and the Demand for State Lottery Tickets

Laitner, John - In: Review of Economic Dynamics 2 (1999) 1, pp. 273-290

Empirical evidence suggests that the poor spend a larger fraction of their income on gambling than the well-to-do. This paper shows that "means tests" for public-assistance eligibility could supply part of the explanation. Income support programs can distort private budget sets, conceivably...

Persistent link: https://www.econbiz.de/10005069645

On the Persistence of Income Shocks over the Life Cycle: Evidence, Theory, and Implications

Karahan, Fatih; Ozkan, Serdar - In: Review of Economic Dynamics 16 (2013) 3, pp. 452-476

idiosyncratic earnings shocks? This paper proposes a novel specification for residual earnings that allows for an age profile in the … workers. Persistence rises with age, up to unity, until midway through life. The variance of persistent shocks exhibits a U … specification in the literature (with age-invariant persistence and variance) cannot capture the earnings dynamics of young workers …

Persistent link: https://www.econbiz.de/10011133629

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