to college households in terms of welfare. Chapter 2 disentangles the effect of demographic change on returns to risk …. Chapter 3 develops a method for computing transitional dynamics in heterogeneous agent models with aggregate risk if these …

We extend the canonical income process with persistent and transitory risk to shock distributions with left …-skewness and excess kurtosis, to which we refer as higherorder risk. We estimate our extended income process by GMM for household … show that in a standard incomplete-markets life-cycle model, first, higher-order risk has sizable welfare implications …

We extend the canonical income process with persistent and transitory risk to shock distributions with left …-skewness and excess kurtosis, to which we refer as higher-order risk. We estimate our extended income process by GMM for household … show that in a standard incomplete-markets life-cycle model, first, higher-order risk has sizable welfare implications …

aggregate risk. We argue that interactions between the two risks are important for this question. One is a direct interaction in … the form of a countercyclical variance of idiosyncratic income risk. The other indirectly emerges over a household's life …-cycle because retirement savings contain the history of idiosyncratic and aggregate shocks. We show that this leads to risk …