Consumption Commitments and Risk Preferences

Chetty, Raj; Szeidl, Ádám

doi:10.3386/w12467

Cited by 108 publications

(143 citation statements)

References 19 publications

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“…The issue of adjustment costs associated with housing wealth and consumption behavior was recently investigated by Chetty and Szeidl (2007). They develop a life-cycle model in which households derive utility from housing and non-housing consumption such as clothing and food.…”

Section: Housing and Portfolio Choicementioning

confidence: 99%

Saving Behavior and Portfolio Choice After Retirement

2015

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This paper reviews the literature on saving behavior and portfolio choice after retirement and provides a descriptive analysis of this behavior by Dutch elderly households. Studying saving behavior in the Netherlands is informative because of the very different institutional background compared to the US, for which most of the empirical evidence is. In the Netherlands, the generous pension system and almost complete coverage of the public health-and long-term care insurance system makes precautionary saving less necessary. Using detailed administrative data, we present evidence on the extent to which the financial resources of retirees are affected by shocks such as the decease of a spouse or deteriorating health-similar to recent empirical studies by Poterba et al. ( 2014) for the US. Moreover, we examine the extent to which retirees who do not experience any shocks are able to keep positive wealth at their disposal and sustain their consumption level during retirement. Our results show that the death of the spouse results in a significant reduction of household wealth compared to surviving couples-which is also found in the USwhile health shocks result in higher household savings in old-age due to the almost complete coverage of health care expenditures. Although retirees in the Netherlands face limited uncertainty about health expenditures, our analysis shows that the elderly, on average, keep large amounts of assets even at a very old age. Our findings suggest that (1) the generous pension benefits are protective of household wealth, (2) illiquid housing wealth constrains the decumulation of household wealth, (3) bequests and transfers after the death of the first spouse are important.

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Section: Housing and Portfolio Choicementioning

confidence: 99%

Saving Behavior and Portfolio Choice After Retirement

2015

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“…In particular, their concern was with small stakes gambling such as buying a lottery ticket. Chetty and Szeidl (2007) provide a microeconomic motivation for Friedman-Savage utility via consumption commitments (e.g. housing), for which the spending cannot easily be adjusted.…”

Section: Solutionsmentioning

confidence: 99%

The pricing kernel puzzle: survey and outlook

Cuesdeanu

Jackwerth

2017

Ann Finance

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“…First, I show that the lower rejection rate in the second group is unlikely to re ‡ect some unmeasured feature of the cannot explain why people turn down small risks of the sort studied here. In fact, consumers with commitments behave as risk neutral vis-a-vis risks of this sort (Chetty and Szeidl, 2007 , Table II) interview that happens to a¤ect the lottery decision. Second, in the next section I show that the e¤ect of accessibility varies in ways that are fully consistent with what narrow framing theory would predict.…”

Section: Dealing With Some Objectionsmentioning

confidence: 99%

“…Obviously, since earnings risk is correlated with other attributes of the individual that may discourage lottery participation directly, it is crucial to control for such attributes. 10 Those facing an uncertain income have a 6.3-percentage-points lower probability of turning down the lottery. This is the average e¤ect for the whole sample.…”

Section: The E¤ect Of Pre-existing Riskmentioning

confidence: 99%

A Test of Narrow Framing and its Origin

Guiso

2015

Ital Econ J

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I provide a test of narrow framing to explain why individuals turn down small positive expected value lotteries. Participants in a large survey have been asked whether they would accept a small lottery of winning 180 euros with probability of 1/2 or losing 100 euros with the same probability. To half of the sample, randomly selected, the lottery question was asked at the beginning of the interview; the other half made the decision immediately after they were asked to think about and report their subjective probability distribution of future earnings. Consistent with narrow framing, I …nd that individuals that were induced to bring their earnings risk to mind before facing the decision are signi…cantly less likely to turn it down. Furthemore, only those who actually say they are uncertain about their incomes are less likely to reject the lottery. I show that attitudes towards regret and reliance on intuition rather than reasoning are likely to drive the tendency to frame choices narrowly.JEL Classi…cation: D1, D8

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Consumption Commitments and Risk Preferences

Cited by 108 publications

References 19 publications

Saving Behavior and Portfolio Choice After Retirement

Saving Behavior and Portfolio Choice After Retirement

The pricing kernel puzzle: survey and outlook

A Test of Narrow Framing and its Origin

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