What is the optimal consumer bankruptcy law? I examine this question in the context of an incomplete markets lifecycle model with a planner who can choose state-contingent bankruptcy costs. I develop two key theoretical characterizations. First, the optimal policy has a bang-bang property: The...

This paper models the effect of a HIV/AIDS epidemic on saving behavior and studies the welfare effects of testing for HIV. The model specifies a utility function that includes both regular consumption, and medical expenditures. Medical expenditures generate more utility if individuals are HIV...

We solve for optimal consumption and portfolio choice in a life-cycle model with short-sales and borrowing constraints, undiversifiable labor income risk and a predictable, time-varying, equity premium and show that the investor pursues aggressive market timing strategies. Importantly, in the...