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dc.contributor.authorFagereng, Andreas
dc.contributor.authorGuiso, Luigi
dc.contributor.authorPistaferri, Luigi
dc.date.accessioned2019-01-28T17:34:08Z
dc.date.available2019-01-28T17:34:08Z
dc.date.issued2017-04-06
dc.identifier.citationFagereng, A., Guiso, L., Pistaferri, L. (2018). Portfolio Choices, Firm Shocks, and Uninsurable Wage Risk, The Review of Economic Studies, 85 (1), 437–474, https://doi.org/10.1093/restud/rdx023nb_NO
dc.identifier.issn1467-937X
dc.identifier.urihttp://hdl.handle.net/11250/2582712
dc.descriptionFirst published online: 06 April 2017nb_NO
dc.description.abstractAssessing the importance of uninsurable wage risk for individual financial choices faces two challenges. First, the identification of the marginal effect requires a measure of at least one component of risk that cannot be diversified or avoided. Moreover, measures of uninsurable wage risk must vary over time to eliminate unobserved heterogeneity. Secondly, evaluating the economic significance of risk requires knowledge of the size of all the wage risk actually faced. Existing estimates are problematic because measures of wage risk fail to satisfy the “non-avoidability” requirement. This creates a downward bias, which is at the root of the small estimated effect of wage risk on portfolio choices. To tackle this problem we match panel data of workers and firms and use the variability in the profitability of the firm that is passed over to workers to obtain a measure of uninsurable risk. Using this measure to instrument total variability in individual earnings, we find that the marginal effect of uninsurable wage risk is much larger than estimates that ignore endogeneity. We bound the economic impact of risk and find that its overall effect is contained, not because its marginal effect is small but because its size is small. And the size of uninsurable wage risk is small because firms provide substantial wage insurance. JEL D8 - Information, Knowledge, and Uncertainty D1 - Household Behavior and Family Economics G11 - Portfolio Choice; Investment Decisionsnb_NO
dc.language.isoengnb_NO
dc.publisherOxford University Pressnb_NO
dc.subjectPortfolio choicenb_NO
dc.subjectUninsurable wage risknb_NO
dc.subjectFirm shocksnb_NO
dc.subjectLabor income risknb_NO
dc.subjectLife- cyclenb_NO
dc.subjectInsurancenb_NO
dc.subjectConsumptionnb_NO
dc.titlePortfolio choices, firm shocks, and uninsurable wage risknb_NO
dc.typeJournal articlenb_NO
dc.typePeer reviewednb_NO
dc.description.versionacceptedVersionnb_NO
dc.rights.holderOxford University Press.nb_NO
dc.subject.nsiVDP::Samfunnsvitenskap: 200::Økonomi: 210nb_NO
dc.source.pagenumberPages 437–474,nb_NO
dc.source.volume85nb_NO
dc.source.journalThe Review of Economic Studiesnb_NO
dc.source.issue1nb_NO
dc.identifier.doihttps://doi.org/10.1093/restud/rdx023


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