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Life-Cycle Preferences Revisited

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Abstract

An axiomatic construction for lifecycle preferences accounting for the finiteness and the randomness of life duration is provided. We emphasize the role of intertemporal correlation aversion and explain why multiplica- tive preferences provide an interesting alternative to additive preferences, allowing to separate risk aversion from intertemporal elasticty of substitu- tion. Implications regarding the shape of the optimal consumption pro?files are discussed.

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Bibliographic Info

Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 11/155.

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Length: 49 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:eth:wpswif:11-155

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Keywords: Intertemporal choice; Life-cycle models; Multivariate risk aver- sion; Uncertain lifetime.;

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References

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  1. Raouf Boucekkine & David de la Croix & Omar Licandro, 2003. "Early Mortality Declines at the Dawn of Modern Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(3), pages 401-418, 09.
  2. Le Grand, François & Chassagnon, Arnold & Bommier, Antoine, 2012. "Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors," Economics Papers from University Paris Dauphine 123456789/4434, Paris Dauphine University.
  3. Antoine Bommier, 2010. "Portfolio Choice under Uncertain Lifetime," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 57-73, 02.
  4. repec:reg:rpubli:282 is not listed on IDEAS
  5. EECKHOUDT, louis & REY, Béatrice & SCHLESINGER, Harris, . "A good sign for multivariate risk taking," CORE Discussion Papers RP -1900, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. BOMMIER, Antoine & LEROUX, Marie- Louise & LOZACHMEUR, Jean- Marie, 2009. "On the public economics of annuities with differential mortality," CORE Discussion Papers 2009030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Steffen Andersen & Glenn W. Harrison & Morten Lau & Elisabet E. Rutstroem, 2011. "Intertemporal Utility and Correlation Aversion," Working Papers 2011_03, Durham University Business School.
  8. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  9. David E. Bloom & David Canning & Bryan Graham, 2003. "Longevity and Life-cycle Savings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(3), pages 319-338, 09.
  10. Bommier, Antoine & Rochet, Jean-Charles, 2003. "Risk Aversion and Planning Horizon," IDEI Working Papers 204, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2004.
  11. Feigenbaum, James, 2008. "Can mortality risk explain the consumption hump?," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 844-872, September.
  12. repec:ebl:ecbull:v:4:y:2007:i:29:p:1-8 is not listed on IDEAS
  13. Antoine Bommier, 2006. "Uncertain Lifetime And Intertemporal Choice: Risk Aversion As A Rationale For Time Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1223-1246, November.
  14. Antoine Bommier, 2008. "Rational Impatience ?," Working Papers hal-00441880, HAL.
  15. van der Ploeg, Frederick, 1993. "A Closed-Form Solution for a Model of Precautionary Saving," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 385-95, April.
  16. Peart, Sandra J. & Levy, David M., 2003. "Denying Human Homogeneity: Eugenics & The Making of Post-Classical Economics," Journal of the History of Economic Thought, Cambridge University Press, vol. 25(03), pages 261-288, September.
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Cited by:
  1. Antoine Bommier, . "Mortality Decline, Impatience and Aggregate Wealth Accumulation with Risk-Sensitive Preferences," Working Papers ETH-RC-14-006, ETH Zurich, Chair of Systems Design.
  2. Antoine Bommier, 2014. "Mortality Decline, Impatience and Aggregate Wealth Accumulation with Risk-Sensitive Preferences," CER-ETH Economics working paper series 14/194, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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