Contrary to the usual presumption that welfare in markets is maximized if consumers behave rationally, we show in a two-period overlapping generations model that there always exists an irrational consumption rule that can weakly improve upon the lifecycle/permanent-income rule in general...

Human mortality data reveal that life expectancy in industrialized countries has been converging to a common value. Yet, significant variations in the distributions of adult life-table ages at death among some developed countries have also been observed. This paper, largely motivated by...

The US social security tax rate has doubled in the last half century. Does the degree of myopic behavior that we observe in the US justify the size of the social security program? To study this question we build a computable general equilibrium model that is composed of life-cycle...

There is voluminous literature on the reasons behind career interruptions, ranging from maternity leave and organizational layoffs, to national service and human capital acquisition. We show that a standard, neoclassical model of intertemporal consumption/saving and labor/leisure choices without...

Although rational consumers without bequest motives are better off investing exclusively with annuitized instruments in partial equilibrium, we demonstrate the welfare effect of annuitization is ambiguous in general equilibrium on account of pecuniary externalities. Absent institutional...