Lifecycle impacts of the financial and economic crisis on household optimal consumption, portfolio choice, and labor supply

The direct financial impact of the financial crisis has been to deal a heavy blow to investment-based pensions; many workers lost a substantial portion of their retirement saving. The financial sector implosion produced 
The direct financial impact of the financial crisis has been to deal a heavy blow to investment-based pensions; many workers lost a substantial portion of their retirement saving. The financial sector implosion produced an economic crisis for the rest of the economy via high unemployment and reduced labor earnings, which reduced household contributions to Social Security and some private pensions. Our research asks which types of individuals were most affected by these dual financial and economic shocks, and it also explores how people may react by changing their consumption, saving and investment, work and retirement, and annuitization decisions. We do so with a realistically calibrated lifecycle framework allowing for time-varying investment opportunities and countercyclical risky labor income dynamics. We show that households near retirement will reduce both short- and long-term consumption, boost work effort, and defer retirement. Younger cohorts will initially reduce their work hours, consumption, saving, and equity exposure; later in life, they will work more, retire later, consume less, invest more in stocks, save more, and reduce their demand for private annuities. Keywords: Financial Crisis , Household Finance , Cycle Portfolio Choice , Labor Supply Classification: D1, G11, G23, G35, J14, J26, J32
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Metadaten
Author:Jingjing Chai, Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla
URN:urn:nbn:de:hebis:30-115892
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2011,23
Series (Serial Number):CFS working paper series (2011, 23)
Document Type:Working Paper
Language:English
Year of Completion:2011
Year of first Publication:2011
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2011/09/28
Tag:Cycle Portfolio Choice ; Financial Crisis ; Household Finance ; Labor Supply
Issue:September 21, 2011
Pagenumber:39
HeBIS PPN:278502830
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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