uninsured capital income risk, and suffer from an information-processing capacity constraint. For given attention devoted to … capital income risk, we solve for the optimal consumption-saving choices and show that the expected welfare is increasing with … households would pay more attention to capital income risk if they have (i) lower initial wealth endowment, (ii) lower marginal …

theoretical predictions, we find that an increase in income risk is associated with higher savings for loss-averse individuals … the internal margin, i.e., the strength, of loss aversion, and empirically study the relation between income risk …, experimentally elicited loss aversion and precautionary savings. We do so using a sample of 640 individuals from the low-income …

empirically study the relation between income risk, experimentally elicited loss aversion, and precautionary savings. We do so … subject to substantial income risk. In line with the theoretical predictions, we find that an increase in income risk is … aversion. An accompanying laboratory experiment confirms that an exogenous increase in income risk causally leads to this …

Using detailed micro-data, this paper documents that households with lower income risk (and higher income levels … designed to account for the empirically observed negative correlation between income levels and income risk. This interaction … labor income risk. Otherwise, the effects of income risk are masked by wealth effects. In neither case, the MPC depends on …

(2005). We extend it by unemployment risk using Markov chains to model the transition between different employment states … systems as those established in the EU are able to offset the negative impact of unemployment risk on the portfolio …

persistence. -- Precautionary savings ; unemployment insurance ; long-term unemployment ; income uncertainty … (2005). We extend it by unemployment risk using Markov chains to model the transition between different employment states … systems as those established in the EU are able to offset the negative impact of unemployment risk on the portfolio …

Households can rely on private savings or on public unemployment insurance to hedge against the risk of becoming … risk on households’ equity holdings. When incorporating long-term unemployment, the US-equity share drops. This negative … significantly alter portfolio decisions. We show that different responses of portfolios to unemployment risk can be attributed to …

default risk, which results in significant decreases in pension benefits. In order to address the challenge of annuity income … decision to increase annuities in the face of annuity income uncertainty is analogous to deciding when to buy the asset in the …

Uninsurable income risk is often cited as an explanation for empirical deviations from the Lifecycle/Permanent-Income … using a calibrated income process that matches the results in Feigenbaum and Li (2008). In that paper they measure income … uncertainty as the variance of income forecasting errors at different ages and over different time horizons. Here we show that …

(2005). We extend it by unemployment risk using Markov chains to model the transition between different employment states … systems as those established in the EU are able to offset the negative impact of unemployment risk on the portfolio …