Post-retirement, the model in the main text (published in the Review of Economic Dynamics) reduces to the Merton (1969) problem, which has of course an exact solution. Pre-retirement, however, the agent holds an American option, namely, retire now or keep working. Problems involving American...

We examine the effects of collateralized borrowing in a realistically parameterized life-cycle portfolio choice problem. We provide basic intuition in a two-period model and then solve a multi-period model computationally. Our analysis provides insights into life-cycle portfolio choice relevant...

This paper deals with the macroeconomic effects of government guarantees on debt issued by Government-Sponsored Enterprises. We set up an economy with a housing and mortgage market where the government provides banks with insurance against aggregate shocks to mortgage default risk. We then study...

The ability to insure against idiosyncratic endowment risk depends on the organization of markets and the availability of consumption insurance. When all agents are identical ex ante and there are complete contingent claims, then full insurance can be achieved. Simple frictions, such as...

This paper exhibits dynamic features of insurance contracts in the empirical analysis of moral hazard. We first show that experience rating implies negative occurrence dependence under moral hazard: individual claim intensities decrease with the number of past claims. We then show that dynamic...

This paper quantifies the size of precautionary savings implied by a dynamic general equilibrium model with heterogeneous agents when explicitly considering the labor supply decision of households. I find that precautionary savings are smaller than if they were measured by use of a model economy...

We study how credit scoring impacts the ability of individuals to consumption smooth. Our environment has ex-ante heterogeneity of household types. Credit scoring is interpreted as an intermediary's posterior of a household's type conditional on its bankruptcy and borrowing decisions. The...