Journal of Political Economy Vol. 94 No. 3 1986
An Intertemporal Analysis of the Interdependence between Risk Preference, Retirement, and Work Rate Decisions
Abstract
Indivisibilities in consumption, investment, choice of employment, and so forth have been used by others to justify the behavior of the insurance-buying gambler. Unfortunately, these theories ignore the market incentives to make the indivisible divisible through leasing or variation in quality, as well as individual initiative through borrowing and lending. In this paper the same behavior toward risk is explained without resort to indivisibilities or market imperfections, using the effect of work rates and retirement decisions on lifetime earning profiles. This is done using assumptions normally consistent with risk aversion: diminishing marginal utility of consumption and time-separable utility.
- Volume
- 94
- Issue
- 3
- Pages
- 667-682
- Sources
- bibtex:phds-export.bib