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Jel Classification:D91 

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Risk Preferences at the Time of COVID-19: An Experiment with Professional Traders and Students

We study whether the COVID-19 pandemic has impacted risk preferences, comparing the results of experiments conducted before and during the outbreak. In each experiment, we elicit risk preferences from two sample groups: professional traders and undergraduate students. We find that, on average, risk preferences have remained constant for both pools of participants. Our results suggest that the increases in risk premia observed during the pandemic are not due to changes in risk appetite; rather, they are solely due to a change in beliefs by market participants. The findings of our paper support ...
Staff Reports , Paper 927

Report
Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice

We develop a pair of risk measures, health and mortality delta, for the universe of life and health insurance products. A life-cycle model of insurance choice simplifies to replicating the optimal health and mortality delta through a portfolio of insurance products. We estimate the model to explain the observed variation in health and mortality delta implied by the ownership of life insurance, annuities including private pensions, and long-term care insurance in the Health and Retirement Study. For the median household aged 51 to 57, the lifetime welfare cost of market incompleteness and ...
Staff Report , Paper 499

Report
Intergenerational Redistribution in the Great Recession

We construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of big recessions are distributed across different household age groups. The model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages. Asset price declines hurt the old, who rely on asset sales to finance consumption, but benefit the young, who purchase ...
Staff Report , Paper 498

Working Paper
Explaining Intergenerational Mobility: The Role of Fertility and Family Transfers

Poor families have more children and transfer less resources to them. This suggests that family decisions about fertility and transfers dampen intergenerational mobility. To evaluate the quantitative importance of this mechanism, we extend the standard heterogeneous agent life cycle model with earnings risk and credit constraints to allow for endogenous fertility, family transfers, and education. The model, estimated to the US in the 2000s, implies that a counterfactual flat income-fertility profile would-through the equalization of initial conditions-increase intergenerational mobility by ...
Working Papers , Paper 2018-011

Report
Do consumers rely more heavily on credit cards while unemployed?

Leading up to the Great Recession, households increased their credit card debt by over 16 percent ($121 billion) during the five-year period from 2004 to 2009. The unemployment rate simultaneously began to rise in 2008, increasing from 5.0 percent in January 2008 to a high of 10.0 percent in October of 2009. During the recovery, from 2009 to 2014, credit card debt fell by more than 25 percent, as the unemployment rate returned to near prerecession levels. These coincident developments have led to speculation that consumers facing unemployment or job uncertainty may have increased their ...
Research Data Report , Paper 16-6

Working Paper
The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models

A standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the ?age profile" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that this approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I illustrate ...
Working Paper Series , Paper WP-2017-18

Working Paper
Rushing into American Dream? House Prices, Timing of Homeownership, and Adjustment of Consumer Credit

In this paper we use a large panel of individuals from Consumer Credit Panel dataset to study the timing of homeownership as a function of credit constraints and expectations of future house price. Our panel data allows us to track individuals over time and we model the transition probability of their first home purchase. We find that in MSAs with highest quartile house price growth, the median individual become homeowners earlier by 5 years in their lifecycle compared to MSAs with lowest quartile house price growth. The result suggests that the effect of expectation dominates the effect of ...
Working Paper Series , Paper WP-2013-13

Working Paper
Revisiting the Role of Home Production in Life-Cycle Labor Supply

This paper examines the role of home production in estimating life-cycle labor supply. I show that, consistent with previous studies, ignoring an individual?s time spent on home production when estimating the Frisch elasticity of labor supply biases its estimate downwards. I also show, however, that ignoring other ways a household can satisfy the demand for home production biases its estimate upwards. Changes in this demand over the life-cycle have an income effect on labor supply, but the effect can be mitigated through purchases in the market and through the home production of other ...
Working Paper Series , Paper WP-2015-2

Working Paper
Scarred Consumption

We show that prior lifetime experiences can "scar" consumers. Consumers who have lived through times of high unemployment exhibit persistent pessimism about their future financial situation and spend significantly less, controlling for the standard life-cycle consumption factors, even though their actual future income is uncorrelated with past experiences. Due to their experience-induced frugality, scarred consumers build up more wealth. We use a stochastic lifecycle model to show that the negative relationship between past experiences and consumption cannot be generated by financial ...
International Finance Discussion Papers , Paper 1259

Working Paper
Labor Force Transitions at Older Ages : Burnout, Recovery, and Reverse Retirement

Partial and reverse retirement are two key behaviors characterizing labor force dynamics for individuals at older ages, with half working part-time and over a third leaving and later re-entering the labor force. The high rate of exit and re-entry is especially surprising given the declining wage profile at older ages and opportunities for re-entry in the future being uncertain. In this paper we study the effects of wage and health transition processes as well as the role of accrues work-related strain on the labor force participation on older males. We find that a model incorporating a work ...
Finance and Economics Discussion Series , Paper 2016-053

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