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Age Clienteles Induced by Liquidity Constraints

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  • Brown, David P

Abstract

Lifetime consumption-portfolio rules are analyzed for individuals with nonmarketable income. Future income for which liquidity constraints are not binding is "effectively marketable" and is capitalized, while other income is not capitalized. If the age-income profile is humped, then, for a given level of marketable wealth, relative risk aversion to gambles in marketable wealth is low for the middle-aged and high for the retired in the special case of isoelastic utility. The existence of these clienteles suggests that equilibrium security prices are determined, in part, by the distribution of wealth over age groups in the economy. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Brown, David P, 1990. "Age Clienteles Induced by Liquidity Constraints," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(4), pages 891-912, November.
    • Handle: RePEc:ier:iecrev:v:31:y:1990:i:4:p:891-912
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    Cited by:

    1. Kjetil Storesletten & Chris Telmer & Amir Yaron, 2007. "Asset Pricing with Idiosyncratic Risk and Overlapping Generations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 519-548, October.
    2. Céline Grislain-Letrémy, 2018. "Natural Disasters: Exposure and Underinsurance," Annals of Economics and Statistics, GENES, issue 129, pages 53-83.
    3. Doriana Ruffino, 2014. "Resuscitating Businessman Risk: A Rationale for Familiarity-Based Portfolios," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(1), pages 107-130, January.
    4. repec:dau:papers:123456789/13276 is not listed on IDEAS
    5. Suné Ferreira & Zandri Dickason-Koekemoer, 2020. "A structural equation model of financial risk tolerance in South Africa," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1811595-181, January.
    6. J. Francois Outreville, 2014. "Risk Aversion, Risk Behavior, and Demand for Insurance: A Survey," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 37(2), pages 158-186.

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