The Equity Premium: It's Still a Puzzle

Kocherlakota, Narayana

doi:10.21034/dp.102

Cited by 262 publications

(339 citation statements)

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“…Type 1, type 3, and type 2 individuals appear particularly more able than other types. A deeper analysis of the correlation between ability and realized schooling attainments is delayed to Section 5. subjective discount rate, 0.0299, appears quite reasonable and is close to estimates reported in the financial economics literature; see Kocherlakota (1996). The wage and employment returns to schooling are found in Table IV.…”

Section: The Role Of Unobserved Ability In Explaining Schooling Attsupporting

confidence: 83%

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Unobserved Ability and the Return to Schooling

2002

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CIRANOLe CIRANO est un organisme sans but lucratif constitué en vertu de la Loi des compagnies du Québec. Le financement de son infrastructure et de ses activités de recherche provient des cotisations de ses organisationsmembres, d'une subvention d'infrastructure du ministère de la Recherche, de la Science et de la Technologie, de même que des subventions et mandats obtenus par ses équipes de recherche. CIRANO is a private non-profit organization incorporated under the Résumé / AbstractÀ partir d'un échantillon tiré du National Longitudinal Survey of Youth (NLSY), nous estimons un modèle de programmation dynamique des choix d'éducation en présence d'hétérogénéité non observée dans les capacités scolaires et aptitudes sur le marché de l'emploi. L'utilité instantanée de la fréquentation scolaire ainsi que la fonction de salaire sont évaluées de façon flexible. L'hypothèse nulle que les rendements marginaux de l'éducation sont constants est catégoriquement rejetée en faveur d'une fonction de salaire convexe composée de huit segments de fonction d'approximation spline. Les rendements marginaux s'avèrent être très faibles jusqu'à la onzième année (1 % ou moins par an), augmentent jusqu'à 3,7 % pour la douzième année et dépassent les 10 % pour les années 14 à 16. Le rendement moyen augmente uniformément de 0,4 % (7 ème année) à 4,6 % (16 ème année). La convexité de la fonction de régression logarithmique du salaire implique que ceux qui atteignent un plus haut niveau de scolarisation obtiennent également de meilleurs rendements moyens sur le marché de l'emploi. Nous rejetons l'hypothèse nulle selon laquelle les aptitudes non observées sur le marché du travail ne sont pas corrélées avec les niveaux d'éducation atteints. Ce résultat va à l'encontre de ceux obtenus dans plusieurs études antérieures qui estimaient le rendement de l'éducation par la méthode des MCO. Nous trouvons une corrélation positive entre le niveau de scolarité atteint et les aptitudes sur le marché de l'emploi, confirmant ainsi l'existence d'un «Biais d'aptitude» positif.

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Section: The Role Of Unobserved Ability In Explaining Schooling Attsupporting

confidence: 83%

“…Not surprisingly, we find that internal rates are higher for those with high ability (type 1, type 3, and type 2) than for those with low ability (type 4, type 5, and type 6). Overall, these internal rates are comparable to rates of return on risky investments (Kocherlakota (1996)).…”

Section: Internal Rate Of Return To Four Year Collegementioning

confidence: 72%

Unobserved Ability and the Return to Schooling

2002

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“…Most of this literature, of which Telmer (1993), Lucas (1994), and Heaton and Lucas (1996) are representative, provides numerical solutions to models calibrated to observed parameters. (Kocherlakota (1996) provides an excellent and intuitive discussion of the numerical findings.) This literature generally concludes that market incompleteness alone is not sufficient to explain the quantitative features of the data.…”

Section: Introductionmentioning

confidence: 94%

Does Market Incompleteness Matter?

2002

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This paper argues that incompleteness of intertemporal financial markets has little effect (on welfare, prices, or consumptions) in an economy with a single consumption good, provided that traders are long-lived and patient, a riskless bond is traded, shocks are transitory, and there is no aggregate risk. In an economy with aggregate risk, a similar conclusion holds, provided traders share the same CRRA utility function and the right assets are traded. Examples demonstrate that these conclusions need not hold if the wrong assets are traded or if the economy has multiple consumption goods. JEL Classification Numbers D41, D51

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“…Appendix E. A Comment on Preferences Estimates Table 4 shows that the estimates are economically reasonable across both sexes. For instance, the relative risk aversion coefficients in the literature vary from 1 to 6, or higher depending on the context (Mehra and Prescott, 1985;Kocherlakota, 1996;Chetty, 2006). Our average estimate of c is roughly 4.52 for males and 3.69 for females.…”

Section: ]mentioning

confidence: 81%

Retirement Savings: A Tale of Decisions and Defaults

Dobrescu

Fan

Bateman

et al. 2017

The Economic Journal

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This study develops a structural dynamic life‐cycle model to examine the behavior of members of an industry‐wide pension fund to assess both the prevalence of defaults and their impact on retirement savings. We estimate the model using the simulated method of moments on administrative data from a large Australian pension fund. Our results show that default settings strongly influence wealth accumulation. Such settings are also highly persistent, both over time and across decisions. Overall, the findings suggest that if defaults (particularly the irreversible ones) are not carefully designed, retirement savings can be severely affected.

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The Equity Premium: It's Still a Puzzle

Cited by 262 publications

References 0 publications

Unobserved Ability and the Return to Schooling

Unobserved Ability and the Return to Schooling

Does Market Incompleteness Matter?

Retirement Savings: A Tale of Decisions and Defaults

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