Between 2006 and 2008, 9% of Korean households had an income decrease of 50% or more, a rate almost identical to the U.S., despite the much lower impact of the global financial crisis on Korea. We ran a logistic regression to determine factors related to the likelihood of a substantial income...

We show how to use panel data on household consumption to directly estimate households’ risk preferences. Specifically, we measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model, which we then test allowing for this heterogeneity. There is...

Hypothetical questions were used with 252 students at two universities to elicit values of relative risk aversion and of the elasticity of marginal utility with respect to consumption. Conceptually, the magnitude of these two utility function parameters are plausibly similar, but there was not a...

This study utilizes a nationally representative proprietary dataset to examine the annuitization decisions of retirees. The results indicate that consulting a financial advisor, retirement duration, and risk aversion are positive predictors of annuity ownership. The results also indicate that...

We study how unemployment affects the over-indebtedness of households using the new European Household Finance and Consumption Survey (HFCS). First, we assess the role of different labor market statuses (i.e. employed, unemployed, disabled, retired, etc.) and other household characteristics...

I solve the life-cycle portfolio allocation problem of a disappointment averse (DA) agent with labor income risk. DA preferences overweight disappointing outcomes and are consistent with behavior highlighted by the Allais paradox. I show that unlike constant relative risk aversion (CRRA)...

We establish a powerful method to solve the life-cycle consumption choice problem of an individual facing biometric risks that are uninsurable. Problems of this type are notoriously hard to solve and closed-form solutions are unknown. The solution is obtained by optimizing over a parametrized...

We study how background health risk affects financial risk-taking. We elicit financial risk-taking behavior of a representative sample of more than 5,000 Germans in five panel waves during the COVID-19 pandemic. Exploiting variation in local infections across time and space, we find that an...

This paper studies the life cycle consumption-investment-insurance problem of a family. The wage earner faces the risk of a health shock that significantly increases his probability of dying. The family can buy term life insurance with realistic features. In particular, the available contracts...

Carroll and Kimball (1996) show that the consumption function for an agent with time-separable, isoelastic preferences is concave in the presence of income uncertainty. In this paper I show that concavity breaks down if we abandon time-separability. Namely, if an agent maximizing an isoelastic...