International Portfolio Diversification and Labor/Leisure Choice
When marginal utility of consumption depends on leisure, investors will take this into account when allocating their wealth among different assets. This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor-leisure and consumption are chosen endogenously. We use this framework to study the effect of leisure for optimal international diversification. We find that in the symmetric case the model's ability to help explain home-bias depends crucially on the level of substitutability between consumption and leisure.
|Date of creation:||Jan 1998|
|Publication status:||published as Jermann, Urban J. "International Portfolio Diversification And Endogenous Labor Supply Choice," European Economic Review, 2002, v46(3,Mar), 507-522.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Baxter, Marianne & Jermann, Urban J. & King, Robert G., 1998.
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- Marianne Baxter & Urban J. Jermann, 1995. "The International Diversification Puzzle is Worse Than You Think," NBER Working Papers 5019, National Bureau of Economic Research, Inc.
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