Showing 1 - 10 of 15
Hyperbolic discounting with naiveté is widely believed to provide a better explanation than exponential discounting of why people borrow so much and why they wait so long to save for retirement. We reach a different set of conclusions. We show that if financial planning is enriched to include...
Persistent link: https://www.econbiz.de/10011165918
In this paper we propose a new strategy for comparing the behavior of a hyperbolic discounter who possesses self-control problems to an exponential discounter who does not. Our strategy controls for inherent differences in overall levels of impatience across discount functions, which thereby...
Persistent link: https://www.econbiz.de/10010743718
Persistent link: https://www.econbiz.de/10008495290
We quantify the welfare gains from better retirement planning using a model in which retirement planning is time inconsistent. A modest increase in a household’s planning horizon by just a few years generates large aggregate and individual welfare gains.
Persistent link: https://www.econbiz.de/10010702786
We present a rule-of-thumb consumption model with participation in a ``Save More TomorrowTM'' (SMarT) plan, and we analytically derive the fraction of life-cycle wage increases that must be saved to offset a reduction in social security benefits resulting from an aging population (holding taxes...
Persistent link: https://www.econbiz.de/10010552800
Persistent link: https://www.econbiz.de/10011120966
We study the optimal size of a pay-as-you-go social security program for an economy composed of both permanent-income and hand-to-mouth consumers. While previous work on this topic is framed within a two-period partial equilibrium setup, we study this issue in a life-cycle general equilibrium...
Persistent link: https://www.econbiz.de/10010781725
Social security is commonly viewed as a commitment device for hyperbolic consumers. We argue that such common intuition is not consistent with formal economic theory. In a model where the government can choose either time-consistent or time-inconsistent policies to govern its social security...
Persistent link: https://www.econbiz.de/10011065379
We study the optimal size of a pay-as-you-go social security program for an economy composed of both permanent-income and hand-to-mouth consumers. While previous work on this topic is framed within a two-period partial equilibrium setup, we study this issue in a life-cycle general equilibrium...
Persistent link: https://www.econbiz.de/10004997957
Contrary to the usual presumption that welfare is maximized if consumers behave rationally, we show in a two-period overlapping generations model that there always exists a rule of thumb that can weakly improve upon the lifecycle/permanent-income rule in general equilibrium with irrational...
Persistent link: https://www.econbiz.de/10005038425