an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

urban spatial structure urban structure is increasingly characterized by decentralization dispersion and multiple employment centers much is known empirically about such patterns and about how the interplay between agglomerative and dispersive forces generates spatial structures that are complex and prone to multiple equilibria and dynamic path dependence these forces operate at different spatial scales many entail unpriced interaction and external scale economies deriving from product differentiation and endogenous technical change appear particularly important because these forces interact in complex ways inefficiencies in urban structure are resistant to simple policy interventions

employer matching and 401 k saving evidence from the health and retirement study abstract employer matching of employee 401 k contributions is often touted as a powerful incentive to save for retirement and is a key component in pension plan design in the united states using detailed administrative contribution earnings and pension plan data from the health and retirement study this analysis formulates a life cycle consistent econometric specification of 401 k saving and estimates the determinants of saving accounting for non linearities in the household budget set induced by matching the participation estimates indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401 k participation by 5 percentage points the parametric and semi parametric estimates for saving indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401 k saving by 365 in 1991 dollars overall the analysis reveals that the 401 k saving response to matching is quite inelastic and hence matching is a rather poor policy instrument with which to raise retirement saving

comparative statics analysis of a fully closed city abstract this paper extends the existing comparative statics analysis about open or semiclosed cities notably that of w wheaton j econom theor 9 2 223 237 1974 to a fully closed city where urban land rent is redistributed to the city population specifically we examine the effects on changes in exogenous variables such as population size agricultural rent and initial endowments on endogenous variables such as welfare level city size and rent schedule most but not all of the existing results are reestablished surprisingly it is shown that in contrast to the existing literature and perhaps to intuition the city area may shrink when the city population increases the paper also extends the existing literature by analyzing the effect of the exogenous variables on the endogenous income and the demand for transportation it is shown that under plausible assumptions the quantity of transportation demanded declines with its price

precautionary saving and endogenous labor supply with and without intertemporal expected utility we analyze precautionary saving behavior in a framework with labor and nonlabor income risks an endogenous supply of labor and a representation of preferences that disentangles attitudes towards risk attitudes towards intertemporal substitution and ordinal preferences for consumption and leisure this preference structure allows us to disentangle and to describe in an intuitive way the different forces that determine precautionary saving in the small and in the large

comparative statics analysis of density controls abstract the general similarity of the results of comparative statics in a semiclosed and in a fully closed city have been demonstrated by pines and sadka journal of urban economics 20 1 20 1986 the objective of this paper is to determine if the consequences of different forms of public regulation of the urban land market are also invariant with respect to the type of city the conclusion is that while there are well defined consequences of such controls on metropolitan area and land values in a semiclosed city the impacts in a fully closed city are generally ambiguous therefore proposals for the introduction of zoning and density regulation have to be city specific and take into consideration the pattern of land ownership and the extent of leakage of urban land rent income

saving incentives for low and middle income families evidence from a field experiment with h r block this paper analyzes the effects of a large randomized field experiment carried out with h r block offering matching incentives for ira contributions at the time of tax preparation about 15 000 h r block clients in 60 offices in predominantly low and middle income neighborhoods in st louis were randomly offered a 20 percent match on ira contributions a 50 percent match or no match the control group brookings institute

a new method of estimating risk aversion i show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model i derive a formula for the coefficient of relative risk aversion in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor i bound the degree of complementarity using data on consumption choices when labor supply varies across states using labor supply elasticity estimates i find a mean estimate of 1 then show generating 2 requires that wage increases cause sharper labor supply reductions jel d81 j22

aggregate land rents and aggregate transport costs this paper explores the relationship between aggregate land rents and aggregate transport costs for land markets in which locations differ solely in terms of accessibility that there exists a relationship between land rents and transport costs has been recognized at least since the time of von thunen the precise relationship between the two is however not generally well understood for instance until quite recently it was considered correct to estimate the benefits from a transport improvement by the induced change in aggregate land rents at those locations where travel costs are reduced this procedure can be shown to be correct only in very special circumstances this paper presents a very general characterization of the relationship between aggregate land rents and aggregate transport costs in some special cases the relationship turns out to be remarkably simple for a circular city with linear transport costs aggregate transport costs are precisely twice aggregate land rents independent of the distribution of tastes or income for a linear city with linear transport costs aggregate transport costs are equal to aggregate land rents one corollary of our general analysis is that aggregate land rents may stay the same or actually fall in response to a transport improvement which makes everyone better off in the first section we consider a simple example the second derives the basic theorems of the paper while the third examines their implications for the relationship between the benefits from a transport improvement and the change in aggregate land rents induced by the improvement and in the fourth section we examine the extent to which the theorems of section ii generalize this abstract was borrowed from another version of this item

in search of inclusion informal sector participation in a voluntary defined contribution pension system abstractthis paper examines who contributes and who persists in contributing in a national voluntary defined contributory pension programme where the government provides the incentive of matching contributions of a minimum amount usd 16 the paper uses proprietary data from a financial services firm where 12 per cent of customers 37 000 individuals chose to participate in this programme the evidence shows that only about 50 per cent of contributors reach the minimum amount for the co contribution but that participants persist in contributing even if they failed to contribute the minimum amount in a given year while this paper does not provide causal estimates it does present evidence of considerable interest among the informal sector in a state run voluntary pension programme in an emerging market where access to formal finance is otherwise poor

formative experiences and portfolio choice evidence from the finnish great depression we trace the impact of formative experiences on portfolio choice plausibly exogenous variation in workers exposure to a depression allows us to identify the effects and a new estimation approach makes addressing wealth and income effects possible we find that adversely affected workers are less likely to invest in risky assets this result is robust to a number of control variables and it holds for individuals whose income employment and wealth were unaffected the effects travel through social networks individuals whose neighbors and family members experienced adverse circumstances also avoid risky investments

the exponential density function first principles comparative statics and empirical evidence abstract it is well known that the exponential density function can be derived using a compensated demand for bousing with a unitary price elasticity we investigate how such an elasticity can arise from first principles and are thus able to identify the determinants of the density gradient we then use these determinants together with existing comparative statics to examine unambiguously the relation between the density gradient and some exogenous variables we conclude that our results are closely supported by existing empirical evidence except for the effect of urban population size on the density gradient

pension plan characteristics and framing effects in employee savings behavior abstract defined contribution pensions in many postsecondary institutions are funded by a combination of an employer premium and a mandatory employee premium individuals can also contribute to a supplemental savings account holding constant total compensation standard reasoning suggests that supplemental savings should depend negatively on the sum of the employer and employee pension contributions contrarily we find that the supplementary savings of professors are significantly more sensitive to employee contributions than to employer contributions this asymmetry is consistent with different marginal propensities to save out of the salary and pension components of compensation nevertheless impacts on lifetime utility are relatively modest

labor supply under wage uncertainty abstract we consider an agent in an atemporal setting facing an increase in the uncertainty of her uncertain wage more labor is supplied given small initial wage uncertainty by a person with a ces utility function with an elasticity greater than unity we relate this result to an extended measure of decreasing relative risk aversion a cobb douglas person makes no change in her labor supply in response to increased wage uncertainty

equilibrium in securities markets with heterogeneous investors and unspanned income risk abstract in a finite time horizon incomplete market continuous time setting with dividends and investor incomes governed by arithmetic brownian motions we derive closed form solutions for the equilibrium risk free rate and stock price for an economy with finitely many heterogeneous cara investors and unspanned income risk in equilibrium the sharpe ratio is the same as in an otherwise identical complete market economy whereas the risk free rate is lower and consequently the stock price is higher the reduction in the risk free rate is highest when the more risk averse investors face the largest unspanned income risk

why did male pension coverage decline in the 1980s this analysis of 1979 and 1988 may current population survey data suggests explanations for why male pension coverage declined during the 1980s and why the decline was particularly pronounced among young workers during the 1980s employment shifted toward jobs with lower pension coverage and this shift was more pronounced among young workers than among older workers more important than the reduction in the percentage of workers offered pensions however was reduced participation in pension plans one factor contributing importantly to declining participation rates was the growing share of pensions that were 401 k plans under such plans participation is more voluntary than it is under other plans and young workers are more likely than older workers to decline to participate

pensions and wages an hedonic price theory approach this paper examines whether a trade off exists between the level of pension benefits and wages the 1983 survey of consumer finance is used to match detailed information on pension plans to worker characteristics for a random sample of the population the pension wage tradeoff is estimated using both a contractual model of the labor market and the spot market model used in previous studies the results indicate a large negative tradeoff in the contractual model but only a negligible tradeoff in the spot market model results from estimating the underlying structural equations for pensions are also presented copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

comparative statics analysis of urban land values in the presence of government regulation the paper undertakes comparative statics of urban land values in the presence of government regulation of density or rent in the central city or at the periphery the principal finding is that the conclusions of wheaton 1974 regarding the flattening of the rent curve due to a rise in income or its steepening following an increase in transport cost need not always hold in the presence of such regulation results of the comparative statics are used to derive practical implications for individual real estate investors and for urban planning

decision support for retirement portfolio management overcoming myopic loss aversion via technology design as firms continue to abandon pensions in favor of employee managed retirement plans tremendous demands are being placed on the decision making proficiency of future retirees as reflected in the equity premium puzzle individual investors tend to hold overly conservative portfolios that provide meager payoffs over time consequently there is growing concern that the vast majority of retirement accounts might be insufficiently funded when employees reach retirement given that most retirement plans can now be managed online a potential solution lies in designing a web based decision support system dss that helps future retirees make more profitable portfolio management decisions this paper reports the results of a study in which 159 retirement plan participants were asked to use an experimental website to manage a portfolio of retirement investments over a simulated 30 year period using a psychological approach toward designing the dss myopic loss aversion is put forth as a theoretical explanation for the psychological mechanisms that encourage investors to hold overly conservative portfolios armed with this knowledge three design features information horizon system restrictiveness and decisional guidance are implemented as part of an overarching design strategy targeted at increasing investors willingness to take calculated risks the results indicate that investor conservatism diminishes when the dss presents prospective probabilities and payoffs over long time horizons in contrast short term information horizons constitute a major stumbling block for investors however when confronted with short term information horizons risk aversion can be successfully counteracted by configuring a dss to either restrict the frequency of decisions or to suggest a relatively aggressive portfolio allocation these findings carry important implications for theory and practice

intergenerational risk sharing and risk taking of a pension fund abstract by using their financial reserves efficiently pension funds can smooth shocks on their asset returns and can thus facilitate intergenerational risk sharing in addition to the primary benefit of improved time diversification this form of risk allocation affords the additional benefit of allowing these funds to take better advantage of the equity premium which also favors the consumers in this paper our aim is twofold first we characterize the socially efficient policy rules of a collective pension plan in terms of portfolio management capital payments to retirees and dividend payments to shareholders we examine both the first best rules and the second best rules where in the latter case the fund is constrained by a solvency constraint and by a guaranteed minimum return to workers contributions second we measure the social surplus of the system compared to a situation in which each generation would save and invest in isolation for its own retirement we estimate that the certainty equivalent return of the pension saving scheme goes from 3 23 per year to 3 76 when intergenerational risk sharing is introduced one of the main results of the paper is that better intergenerational risk sharing does not reduce the risk born by each generation rather it increases the expected return to the workers contributions

strategic control of growth in a system of cities abstract this paper provides an analysis of the supply restriction model of growth controls growth controls in such a model harm consumers while enriching landowners and they will only be adopted if landowners have political power in the model this power is manifested in the city government s use of a social welfare that takes both landlord and consumer welfare into account since cities cannot be small if the supply restriction inherent in growth controls is to have an impact strategic interactions must be considered in the analysis of city choices a general model is presented and an extended example based on leontief preferences is then considered comparative static analysis of nash equilibria in the leontief case shows that perturbations of preferences or other characteristics of a single city can have important spillover effects that alter the choices of all cities in the region

organizational failure and intraprofessional status loss we examine variation in intraprofessional status changes for employees displaced by organizational failure we propose that failure related reductions in bargaining power are moderated by individual status characteristics that influence potential employers evaluations of job candidates and therefore individuals status loss risks treating a prominent law firm s failure as a quasi experiment we test our arguments by analyzing 224 firm partners transitions to subsequent employers most partners regained employment at firms of lower status than the failed firm but independent of their demonstrated productivity a partner s likelihood of status loss increased with tenure in the failed firm s partnership and decreased with educational prestige these results suggest not only that organizational failure can diminish cumulative career advantages but also that status characteristics that enable attainment such as education can protect individuals against status loss

portfolio choice with non expected utility in continuous time non expected utility preferences which can distinguish intertemporal substitution from attitudes towards risk are extended to continuous time the consumption savings and portfolio problem is solved for constant intertemporal elasticity of substitution and constant relative risk aversion

spatially variable property tax and optimal tax composition in congested monocentric cities george pigou ramsey and strotz unified abstract we explore the optimal spatial structure of the property tax in a monocentric city with transportation congestion to show how the availablity of revenue instruments impacts the properties of the optimal property tax we discuss three regimes with different combinations of a head tax congestion tolls and property tax in each regime the tax composition is optimally determined to finance a predetermined expenditure under the first regime with all the three taxes available the first best allocation is achievable only when the property tax is unused under the second regime where only head and property taxes are available a spatially variable property tax substitutes for the unavailable congestion tolls the head tax or subsidy fills the gap between the property tax revenue and the predetermined expenditure moreover property tax is negative positive close to the city center boundary under the third regime where only property tax is available the role of the property tax is twofold to substitute for the unavailable congestion tolls and to finance the predetermined expenditure in general for both roles the optimal tax rates are spatially variable furthermore if its role as a substitute for congestion tolls dominates its other role the property tax may be negative close to the boundary

the effects of marital status and children on savings and portfolio choice this paper investigates the impact of demographic shocks on optimal decisions about saving life insurance and most centrally asset allocation we analyze these choices within the framework of a life cycle model that features exogenous changes in family composition heterogeneity in lifetime income and uninsurable fluctuations in earnings and medical costs our analysis indicates that marital status transitions and children can have important effects on optimal household decisions widowhood induces sharp reductions in the portfolio shares in stock and the impact is largest for women and individuals with children divorce causes men and women to reallocate their portfolios in different directions men choose much riskier allocations while women opt for safer ones children play a fundamental role in the optimal portfolio decisions men with children for example increase their shares in response to divorce by less than half as much as men without children comparing our simulation results with panel data evidence on stockholding from the psid and the hrs we conclude that changes in marital status and children matter empirically as well but not always in the ways that the model predicts

effects of urban transportation system change on land prices in the setting of owner occupied residence abstract the purpose of this study is to analyze the impact of transportation improvement on the land development process and land price structure in an owner occupied residence setting a dynamic model of household and landowner in which the role of land as an asset is explicitly considered is presented and the process of land development and land price change after the announcement of transportation improvement is investigated during the period between the announcement and the completion of urban transportation improvement it is observed that the price of the land that is presently used for agriculture but will be developed in the future is higher than the agricultural land price

equilibrium consumption and precautionary savings in a stochastically growing economy abstract the derivation of a closed form solution for consumption based on the constant elasticity utility function in the presence of stochastic labor income has proved to be intractable this paper derives a closed form equilibrium relationship between consumption and wealth one that holds along a balanced growth path in a stochastic romer endogenous growth model by employing more general recursive preferences we can disentangle the coefficient of relative risk aversion from the intertemporal elasticity of substitution the effects of key structural parameters on equilibrium consumption and its tradeoff with leisure are analyzed a significant aspect of our analysis concerns the extent to which current risk in the economy is shared between labor and capital this plays an important role in determining the impact of risk on the economy in general and on consumption in particular formal analysis is supplemented with extensive numerical simulations

a preliminary exploration on stochastic dynamic asset allocation models under a continuous time sticky price general equilibrium this article studies asset allocation problems under endogenous macroeconomic dynamics and monetary policy rules by merging a continuous time sticky price general equilibrium model based on the ne

do 401 k contributions crowd out other personal saving during the late 1980s contributions to 401 k plans eclipsed contributions to individual retirement accounts iras as the leading form of tax deferred individual retirement saving in the united states in this paper we describe patterns of participation in 401 k plans contrast these patterns with ira participation and evaluate the net impact of 401 k contributions on personal saving we find that 401 k participation conditional on eligibility exceeds 60 at all income levels in contrast ira participation at the height of that program rose sharply with income we use two methods to evaluate the net saving effect of 401 k contributions on personal saving we compare the financial assets of families who are eligible for 401 k saving with the assets of those who are not eligible and we consider the change over time in the assets of like groups of savers we find little evidence that 401 k contributions substitute for other forms of personal saving including ira contributions

saving accounts versus stocks and bonds in household portfolio allocation we study the structure of household portfolios of financial wealth by analyzing both the determinants of total financial wealth and the choice between risky stocks and bonds and riskfree assets saving accounts the econometric specification is a generalized trivariate tobit model estimated on a cross section of 3 077 households in the netherlands in 1988 we account for endogeneity of financial wealth and for selectivity due to nonreporting results show that the level of financial wealth and the marginal tax rate are major determinants of the allocation between riskfree and risky assets

too good to be true the unintended signaling effects of educational prestige on external expectations of team performance in this paper we report the results of two experimental studies designed to test how demographic characteristics affect outsiders assessments of a firm s top managers we draw on theories of evaluation and status characteristics to examine the interactive effects of managers racial characteristics and educational prestige on external perceptions in the first study we find that top executives educational background and race affected analysts valuation of a firm s stock outside analysts made the highest stock price projections for firms led by white executives who had highly prestigious educational backgrounds but made the lowest valuations for firms led by african americans with the same prestigious education we posit that the moderating effect of executives racial characteristics stems from outsiders assumptions that african american managers received preferential treatment in the admissions process for high prestige universities in the second study we find that when we explicitly removed the possibility of preferential selection analysts gave the same stock valuation to firms led by white and african american executives with high educational prestige we discuss the implications of these findings for theory and management

participation in and contributions to 401 k pension plans evidence om plan data k plans differ from traditional employer sponsored pension plans in that employees are permitted to make voluntary pre tax contributions hence the sensitivity of participation and contributions to plan charac teristics notably the employer matching rate may play a critical role in retirement saving using plan level data from form 5500s filed annu ally with the internal revenue service ifind that substantial increases occur when an employer moves from a zero to a small or moderately sized match but that at higher match rates employee contributions fall

are emily and greg more employable than lakisha and jamal a field experiment on labor market discrimination we study race in the labor market by sending fictitious resumes to help wanted ads in boston and chicago newspapers to manipulate perceived race resumes are randomly assigned african american or white sounding names white names receive 50 percent more callbacks for interviews callbacks are also more responsive to resume quality for white names than for african american ones the racial gap is uniform across occupation industry and employer size we also find little evidence that employers are inferring social class from the names differential treatment by race still appears to still be prominent in the u s labor market jel j71 j64

does 401 k eligibility increase saving evidence from propensity score subclassification abstract by comparing 401 k eligible and ineligible households wealth this paper estimates that on average about one half of 401 k balances represent new private savings and about one quarter of 401 k balances represent new national savings responses to eligibility vary considerably however with households who normally save the most largely contributing funds they would have saved anyway this paper improves on previous research by 1 employing propensity score subclassification to control more completely for observed household characteristics 2 controlling for more household characteristics including several correlated with unobserved savings preferences and 3 adjusting the observed measure of households wealth to reduce measurement error

cordon pricing and land use regulation this study explores the simultaneous imposition of cordon pricing and land use regulations in a continuous and closed monocentric city with homogeneous households results reveal the optimal level of a single cordon toll and its location and the optimal floor area ratio far regulation clarifying what distortions remain in the existence of cordon pricing and far regulation among other results this paper shows that with an optimal cordon toll far regulation should alternate between a minimum and a maximum regulation both inside and outside the cordon line

property tax and urban sprawl theory and implications for us cities this article attempts a formal analysis of the connection be tween property tax and urban sprawl in u s cities we develop a theoretical model that includes households who are also landlords and land developers in a regional land market we then test the model empirically based on a national sample of urbanized areas the results we obtained from both theoretical and empirical analyses indicate that increasing property tax rates reduces the size of urbanized areas j e l classification h3 h71 r14

income distribution and the residential density gradient abstract w c wheaton journal of economic theory 9 223 237 1974 asserted that an increase in incomes lowers central densities raising suburban densities in closed monocentric cities with identical resident incomes and tastes we show that with identical cobb douglas tastes and identical incomes a sufficient condition for densities to fall everywhere when incomes rise is that the land rent bill of the innermost resident be larger than the commuting bill of the outermost resident estimating this model using data in e s mills studies in the structure of the urban economy johns hopkins press baltimore london 1972 we show that densities are predicted to fall everywhere in baltimore denver milwaukee philadelphia rochester and toledo when income is increased by 10 circa 1960 but when we disaggregate the model using the 1960 census income distribution keeping tastes identical a 10 increase in incomes rotates densities around distances which vary from 3 3 miles in toledo to 9 8 miles in philadelphia in addition to empirically vindicating wheaton s assertion the disaggregated model gives approximately negative exponential densities consistent with spatial equilibrium and without resorting to r f muth s cities and housing university of chicago press 1969 assumption of a unitary compensated price elasticity of demand

networks diversity and productivity the social capital of corporate r d teams we argue that the debate regarding the performance implications of demographic diversity can be usefully reframed in terms of the network variables that reflect distinct forms of social capital scholars who are pessimistic about the performance of diverse teams base their view on the hypothesis that decreased network density the average strength of the relationship among team members lowers a team s capacity for coordination the optimistic view is founded on the hypothesis that teams that are characterized by high network heterogeneity whereby relationships on the team cut across salient demographic boundaries enjoy an enhanced learning capability we test each of these hypotheses directly and thereby avoid the problematic assumption that they contradict one another our analysis of data on the social networks organizational tenure and productivity of 224 corporate r d teams indicates that both network variables help account for team productivity these findings support a recasting of the diversity performance debate in terms of the network processes that are more proximate to outcomes of interest

the effects of financial education in the workplace evidence from a survey of households abstract we use a novel household survey to investigate the effects of employer based financial education on personal saving we explore cross sectional relations between the availability of employer based financial education and various measures of asset accumulation and we interpret these patterns in light of various potentially confounding factors our findings favor the hypothesis that employer based financial education stimulates saving both in general and for retirement

uniform spatial growth with perfect foresight and durable housing abstract this paper presents explicit solutions for expanding monocentric cities housing is durable and redevelopment cannot take place landlords have perfect foresight the utility function and housing technology are cobb douglas the population of the city per capita income construction costs and transportation costs per mile change at constant percentage rates the model is solved analytically using an infinite time horizon if the population growth rate is greater less than twice the difference between the growth rates of income and transportation costs development density increases decreases with distance from the city center detailed comparative statics are presented for both open city and closed city growth

as time goes by an investigation of how asset allocation varies with investor age abstract we investigate how individuals asset allocations in their portfolios vary with age considering the relationship between individual attitudes and behavior we find individuals portfolios become more risk seeking with age even taking account of asset accumulation counter to their intuition

saving and investing for early retirement a theoretical analysis we study optimal consumption and portfolio choice in a framework where investors adjust their labor supply through an irreversible choice of their retirement time we show that investing for early retirement tends to increase savings and reduce an agent s effective relative risk aversion thus increasing her stock market exposure contrary to common intuition an investor might find it optimal to increase the proportion of financial wealth held in stocks as she ages and accumulates assets even when her income and the investment opportunity set are constant the model predicts a decrease in risk aversion following strong market gains like those observed in the nineties

countercyclical retirement accounts abstract this paper examines an unconventional but potentially effective new fiscal policy tool that can increase saving during good times and increase spending during bad times a cyclical matching rate on contributions to retirement savings accounts the combination of matching rates and matching limits on retirement savings plans creates sharp kinks in intertemporal budget sets that induce many households to save exactly at the matching limit even when economic conditions might call for a fiscal policy to encourage spending rather than saving what if the matching rate instead disappeared during bad aggregate states i model an economy with liquid and illiquid savings accounts in which matching is suspended during downturns the economy features the usual sources of heterogeneity in education and earnings processes and it allows for time inconsistent preferences and heterogeneity in the discount rate although the theoretical effects of a countercyclical match are ambiguous due to income and substitution effects operating in different directions the simulations of the model indicate that the policy delivers a large average increase in consumption from a set of households that look like the wealthy hand to mouth of kaplan et al 2014 and crucially in contrast to conventional fiscal policy the stimulus associated with countercyclical retirement actually improves the government s financing

efficient portfolios when housing needs change over the life cycle abstract we address the issue of the efficiency of household portfolios in the presence of housing risk we treat housing stock as an asset and rents as a stochastic liability stream over the life cycle households can be short or long in their net housing position efficient financial portfolios are the sum of a standard markowitz portfolio and a housing risk hedge term that multiplies net housing wealth our empirical results show that net housing plays a key role in determining which household portfolios are inefficient the largest proportion of inefficient portfolios obtains among those with positive net housing who should invest more in stocks

individual financial decisions in retirement saving plans the role of participant direction abstract workers with individual retirement saving accounts often make decisions about contribution rates and asset allocation that affect ultimate retirement income this paper presents econometric evidence from two data sets on the role that participant investment choice plays in asset allocation contributions and account balances my preferred estimates indicate that participants with investment choice are 36 percent more likely to make an annual contribution these participants are estimated to invest 13 percentage points more in stocks contribute between one and three percentage points more of salary and have at least 9000 more in their account than comparable participants without investment choice

can simple informational nudges increase employee participation in a 401 k plan we report results from a field experiment in which a randomized subset of newly hired workers at a large financial institution received a flyer containing information about the employer s 401 k plan and the value of contributions compounding over a career younger workers who received the flyer were significantly more likely to begin contributing to the plan relative to their peers in the control group many workers do not participate in their employers supplemental retirement savings programs even though these programs offer substantial tax advantages and immediate returns due to matching contributions from a survey of new hires we find that many workers choose not to contribute to the plan because they have other financial priorities however some nonparticipants lack the financial literacy to appreciate the benefit these findings indicate that simple informational interventions can nudge workers to participate in retirement saving plans and enhance individual well being and retirement income security

time preference and capital asset pricing models abstract results of the theory of individual optimal consumption investment choice under uncertainty are extended to a class of intertemporally dependent preferences for consumption streams these results are then used to show that with intertemporally dependent preferences which are more realistic than the separable time additive preference structure merton s 1973 multi beta intertemporal capital asset pricing model is still valid but it can no longer be collapsed to breeden s 1979 single consumption beta model

welfare effects of controlling labor supply an application of the stochastic ramsey model in this paper we extend merton s rev econom stud 42 1975 375 classic stochastic version of the ramsey model by allowing the government to control the expected growth rate of the labor supply we characterize the solution to this control problem for general time separable preferences and derive an analytical solution for the crra case the results show to what extent the planner or government increases consumption and welfare by taking an active role in controlling the economy we also explore the implications of government control of labor growth for the term structure of interest rates and the effects of taxes on capital

constrained labor supply and risk aversion abstract this paper extends previous work by showing that consumption constraints typically increase individuals risk aversion even if the illiquid good e g leisure has good substitutes calibrations indicate time use constraints may raise risk aversion considerably under many common scenarios

the optimal distribution of population across cities abstract we develop an urban model that incorporates 1 heterogeneous sites 2 fiscal and urban externalities and 3 an endogenous number of cities i e the extensive margin of urban development within and across city decreasing returns to scale cause agents to perceive their city as being too large in the socially optimal allocation as a consequence in equilibrium the largest cities on the most amenable sites are undersized whereas the smaller cities on less amenable sites are oversized we propose a test for optimal city size with heterogeneous sites extending the henry george theorem

participation and investment decisions in a retirement plan the influence of colleagues choices abstract this paper investigates whether peer effects play an important role in retirement savings decisions we use individual data from employees of a large university to study whether individual decisions to enroll in a tax deferred account plan sponsored by the university and the choice of the mutual fund vendor for people who choose to enroll are affected by the decisions of other employees in the same department to overcome the identification problems we divide the departments into sub groups along gender status age and tenure lines and we instrument the average participation of each peer group by the salary or tenure structure in this group our results suggest that peer effects may be an important determinant of savings decisions

congestion land use and job dispersion a general equilibrium model abstract in dispersed cities congestion tolls would drive up central wages and rents and would induce centrally located producers to want to disperse closer to their workers and their customers paying lower rents and realizing productivity gains from land to labor substitution but the tolls would also induce residents to want to locate more centrally in order to economize on commuting and shopping travel in a computable general equilibrium model we find that the centralizing effect of tolls on residences dominates on the decentralizing effect of tolls on firms causing the dispersed city to have more centralized job and population densities under stylized parameters we find that efficiency gains from levying congestion tolls on work and shopping travel are 3 0 of average income about 80 of such gains come from road planning and 20 from tolls

health and portfolio choices a diffidence approach the effect of health status on portfolio decisions has been extensively studied from an empirical viewpoint in this paper we propose a theoretical model of individuals choice of financial assets under bivariate utility functions depending on wealth and health our approach makes an extensive use of the diffidence theorem we establish the conditions under which the share of wealth held in risky assets falls as 1 individuals health status deteriorates and 2 individuals health status becomes risky these conditions are shown to be related to the behavior of the intensities of correlation aversion and of cross prudence as wealth increases

intergenerational risk sharing and endogenous labour supply within funded pension schemes funded defined benefit pensions add to welfare on account of providing intergenerational risk sharing but lower it on account of inducing labour supply distortions we show that a properly designed funded defined benefit pension scheme involves a welfare improvement even if contributions are distortionary and even if individuals face potentially correlated wage and equity risks numerical calculations indicate that diversification gains from risk sharing are large compared to the losses related to labour supply distortions this result withstands a number of extensions like the introduction of a short sale constraint for individuals or the inclusion of a labour income tax

labor supply flexibility and portfolio choice in a life cycle model abstract this paper examines the effect of the labor leisure choice on portfolio and consumption decisions over an individual s life cycle the model incorporates the fact that individuals may have considerable flexibility in varying their work effort including their choice of when to retire given this flexibility the individual simultaneously determines optimal levels of current consumption labor effort and an optimal financial investment strategy at each point in his life cycle we show that labor and investment choices are intimately related the ability to vary labor supply ex post induces the individual to assume greater risks in his investment portfolio ex ante

consumption and portfolio choice under internal multiplicative habit formation this paper explores the optimal consumption and investment behavior of an individual who derives utility from the ratio between his consumption and an endogenous habit we obtain closed form policies under general utility functionals and stochastic investment opportunities by developing a nontrivial linearization to the budget constraint this enables us to explicitly characterize how habit formation affects the marginal propensity to consume and optimal stock bond investments we also show that in a setting that combines habit formation with epstein zin utility consumption no longer grows at unrealistically high rates at high ages and investments in risky assets decrease

income risk and portfolio choice an empirical study this paper investigates the relationship between portfolio choice and labor income risk in the national longitudinal survey of youth 1979 cohort permanent income risk variability of shocks to income that have permanent effect significantly reduces the share of risky assets in the household s portfolio while transitory income risk variability of shocks with no lasting effect does not this result provides strong evidence that households portfolio choices respond to labor income risks in a manner consistent with economic theory theoretical work has shown that uninsurable labor income risk is likely to reduce the share of risky assets in an investor s portfolio pratt and zeckhauser 1987 kimball 1993 bertaut and haliassos 1997 koo 1998 1999 elmendorf and kimball 2000 in a dynamic context when labor in come consists of components of different persistence the magnitude of this effect should depend on the persistence associated with the risk the risk to a persistent component should have a larger effect than the risk to a transi tory component surprisingly however empirical work has not examined this interesting implication of the theory this paper uses the rich information con tained in the national longitudinal survey of youth 1979 cohort nlsy79 to examine this implication we assume that labor income has two components permanent and transitory we then measure the risks of the components for a sample of households in the survey and estimate their effects on the risky asset share previous empirical

spatial structure of a metropolitan area with an agricultural hinterland abstract a dual economy metropolitan model is evolved by incorporating both urban and rural sectors to explain the real growth factors of the urban area the competitive relations between urban and agricultural sectors in both labor and land markets are modeled such a dual economy urban model is also indispensable for evaluating the micro effects of industrial policies e g the policy for liberalization of agricultural products on the urban spatial structure comparative static analysis is performed to evaluate the effects of lowered transport cost heightened production efficiency lowered world price of agricultural product and increased metropolitan population

current accounts in debtor and creditor countries the authors reexamine a classic question in international economics what is the current account response to a transitory income shock such as a temporary improvement in the terms of trade a transfer from abroad or unusually high production to answer this question they construct a world equilibrium model in which productivity varies across countries and international borrowing and lending take place to exploit good investment opportunities despite its conventional ingredients the model generates the novel prediction that favorable income shocks lead to current account deficits in debtor countries and current account surpluses in creditor countries evidence from thirteen oecd countries broadly supports this theoretical prediction

income class modal choice and urban spatial structure abstract this paper analyzes the impacts of urban transportation system changes and income changes on the welfare of people and on the urban spatial structure in a setting where the income level differs between two groups and two transportation modes compete with each other in a city it is demonstrated that an improvement in some transport facility will not necessarily increase the welfare level of every household and at times decreases the welfare of some households it also is argued that under particular situations an improvement in a particular transport mode may produce a contraction in the city size rather than an expansion similarly an increase in income of one group might have an adverse effect on the welfare of another income group as a result of competition in the land market

taxes fringe benefits and faculty the growth of employee benefits in academe has closely paralleled their economy wide growth this study estimates a complete system describing the demand for benefits and wages using panel data on 1477 institutions of higher learning the demand for benefits is very responsive to changes in real income and the tax price of benefits these conclusions are robust with respect to varying definitions of the tax price treating it as endogenous and accounting for unmeasured individual effects on demand simulations suggest that the tax reform act of 1986 sharply reduced the demand for benefits extrapolating the impact to the entire economy the annual flow of compensation shifted away from benefits by at least 15 billion copyright 1992 by mit press

the urban impacts of the endangered species act a general equilibrium analysis we consider the general equilibrium implications of environmental regulations which result in a reduction of otherwise profitable residential development critical habitat designation under the endangered species act is an important example if the regulations affect a significant amount of land they may have important effects on the rest of the regional economy increasing rents and densities on lands not subject to the regulation causing the conversion of lands from alternative uses increasing the net developed area in the region and decreasing consumer welfare we develop a flexible general equilibrium simulation of the economic effects of critical habitat designation explicitly considering the distributional effects upon owners of different types of land and upon housing consumers the results of our simulation show that the most significant economic effects of critical habitat occur outside of the designated area the prices and rents of non critical habitat lands increase significantly incomes are redistributed across landlords and the well being of housing consumers is further affected through these linkages

political economy of commuting subsidies abstract we study the political economy of commuting subsidies in a model of a monocentric city with two income classes depending on housing demand and transport costs either the rich or the poor live in the central city and the other group in the suburbs commuting subsidies increase the net income of those with long commutes or high transport costs they also affect land rents and therefore the income of landowners the paper studies how the locational pattern of the two income classes and the incidence of landownership affects the support for commuting subsidies

endogenous labor leisure investment choice under time constraints we posit the opportunity cost of time required to manage risky investments including conducting research and performance monitoring as a potential explanation for the equity premium puzzle an economic agent who should allocate a limited amount of time to labor leisure and risky investment is subject to the opportunity time cost of investment activity which is foregone labor or leisure our model envisages its impact on equity premium and volatility in the presence of such a time constraint in particular with closed form solutions to the risky asset returns volatility and risk free rate in a simple equilibrium framework wherein agents have log utility the model is shown to yield excess return and volatility consistent with historical values observed in the u s stock market even with a small amount of time cost in addition the model enables us to sort out the impact of endogenous labor leisure choice on return dynamics by comparing it with the exogenous labor income case

household portfolio choice and retirement this study examines household portfolio choice through the retirement transition i show that couples significantly decrease their stock allocations after retirement whereas singles allocations remain relatively unchanged reallocations are concentrated among couples in which the wife is more risk averse than her husband husbands and wives respective retirement events are followed by opposite signed changes in stock allocations these findings are consistent with a model of collective household decision making in which spouses have heterogeneous risk preferences and suggest that dynamics in the distribution of intrahousehold bargaining power generate time varying household risk aversion

efficient gradualism in intertemporal portfolios abstract this paper examines intertemporal portfolio plans under autocorrelation in asset returns and considers whether these plans conform to the common advice that risky assets be bought gradually and then held in decreasing amounts as the investment horizon approaches given elliptical returns optimal portfolio plans with precommitment must be mean variance efficient then for arma 1 1 parameterizations with negative autocorrelation the age effect gradual diminishing of risky holdings as the horizon approaches is confirmed as is dollar cost averaging gradual entry into the risky asset for sufficiently distant horizons for a numerically analyzed alternative bivariate returns process only the age effect is confirmed

land rents optimal taxation and local fiscal independence in an economy with local public goods abstract a general equilibrium model of an economy with cities farms and free migration of population is constructed the cities produce internationally traded goods via production functions subject to economies of scale they also produce housing and a local public good two areas are defined to be disjoint if households performing an economic activity in one area are not operating in the other an area is exclusive if it is disjoint to its complement the economic surplus of an area is then defined to be the value of the area s net export of goods and resources local efficiency of an area is defined to be a state in which its economic surplus attains its maximum value this state is proved to be a necessary condition for pareto optimality of the economy it is then proved that beside piguvian corrective taxes the only taxes necessary and sufficient to finance local government activities efficiently are taxes on land rents furthermore if jurisdiction of a local government is over an exclusive area no intervention of central government is necessary and local authorities can be fully autonomous if the economy can be divided into pairwise disjointed exclusive areas those areas are optimal jurisdictions in the sense that efficiency in the economy can be achieved with local authorities only

the panexponential monocentric model abstract we derive declining exponential rent and density functions for a monocentric city from a new set of assumptions which place restrictions on commuting costs rather than on the demand for land the utility function is cobb douglas with unrestricted income expenditure shares for land and for the numeraire good the marginal commuting cost is assumed to be proportional to income earning potential and exponentially declining in distance from the center at a particular constant rate these assumptions capture realistic properties of congested cities under these assumptions equilibrium land rent residential density and numeraire consumption all decline exponentially with distance although at different rates if it is also assumed that traffic speed at the edge of a city is equal to free flow speed then the rates of decline in rent residential density and numeraire consumption all increase with the city s physical size we also suggest a new statistical procedure for estimating negative exponential density functions from a cross section of cities of various sizes

the effects of financial education in the workplace evidence from a survey of employers we examine the effects of education on financial decision making skills by identifying an interesting source of variation in pertinent training during the 1990s an increasing number of individuals were exposed to programs of financial education provided by their employers if as some have argued low saving frequently results from a failure to appreciate economic vulnerabilities then education of this form could prove to have a powerful effect on behavior the current paper undertakes an analysis of these programs using a previously unexploited survey of employers we find that both participation in and contributions to voluntary savings plans are significantly higher when employers offer retirement seminars the effect is typically much stronger for non highly compensated employees than for highly compensated employees the frequency of seminars emerges as a particularly important correlate of behavior we are unable to detect any effects of written materials such as newsletters and summary plan descriptions regardless of frequency we also present evidence on other determinants of plan activity