The role of labor-income risk in household risk-taking
- In fifteen European countries, China, and the US, stocks and business equity as a share of total household assets are represented by an increasing and convex function of income/wealth. A parsimonious model fitted to the data shows why background labor- income risk can explain much of this risk-taking pattern. Uncontrollable labor-income risk stresses middle-income households more because labor income is a larger fraction of their total lifetime resources compared with the rich. In response, middle-income households re-duce (controllable) financial risk. Richer households, having less pressure, can afford more risk-taking. The poor take low risk because they avoid jeopardizing their subsistence consumption.
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| Author: | Sylwia Hubar, Christos Koulovatianos, Jian Li |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-534571 |
| URL: | https://ssrn.com/abstract=3660935 |
| Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 640 |
| Series (Serial Number): | CFS working paper series (640) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Contributor(s): | Richard Rogerson |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2020 |
| Year of first Publication: | 2020 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2020/07/27 |
| Tag: | background risk; business equity; household-portfolio shares; subsistence consumption; wealth inequality |
| Issue: | June 28, 2020 |
| Page Number: | 119 |
| HeBIS-PPN: | 467547211 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
