We use a life cycle model of consumption and portfolio choice to study the effects of social security on the investment decisions of households for the European case. Our model is mainly based on the one developed by Cocco, Gomes, and Maenhout (2005). We extend it by unemployment risk using...

This paper investigates the effect of private pensions on the retirement wealth distribution. The model incorporates stochastic private pension coverage into a lifecycle model with stochastic earnings. The predictions of the calibrated model are compared to the distribution of retirement net...

This paper introduces consumption externalities into a Ramsey-type model with endogenous labour supply and homogeneous agents. The instantaneous utility of any consumer is assumed to depend on work effort, own consumption and relative consumption, where the latter determines the individual's...

In this paper we will use a status-preference framework, together with a standard cost of adjustment investment function, to study the dynamics of the small open economy current account balance. We demonstrate that the transitional dynamics of the economy is characterized by two speeds of...

The implications of status preference in a simple open economy model will be investigated in this paper. The open economy is modeled as a continuum of identical representative agents who have preferences over consumption and status. In the paper status is identified as relative wealth, which...

In our modified version of the small open economy Ramsey model, we assume that agents have preferences over consumption and status which, in turn, is determined by relative wealth. This extension potentially eliminates the standard model's counterfactual result that an impatient country over...

In this paper we analyze the implications of status-preference, modeled as relative wealth, for the current account in a small open economy framework with capital stock dynamics. We demonstrate that the transitional dynamics of the economy is characterized by two distinct speeds of adjustment: a...

This paper explores whether habit formation in the representative agent’s preferences can explain two failures of the standard permanent income model with intertemporally separable utility: the sensitivity of consumption to lagged consumer sentiment and to predictable changes in current income...

This paper provides derivations necessary for solving an optimal consumption problem with multiplicative habits and a CRRA 'outer' utility function either for a microeconomic problem with both labor income risk and rate-of-return risk or for a macroeoconomic representative agent model.

Economists working with numerical solutions to the optimal consumption/saving problem under uncertainty have long known that there are quantitatively important interactions between liquidity constraints and precautionary saving behavior This paper provides the analytical basis for those...