Lifetime Uncertainty

2017 ◽  
Author(s):  
Tullio Jappelli ◽  
Luigi Pistaferri
Keyword(s):  
Intertemporal Choice ◽  
The Elderly ◽  
Terminal Condition ◽  
Positive Probability ◽  
Cycle Model ◽  
Additional Risk ◽  
Liquidity Constraint ◽  
Bequest Motive ◽  
Lifetime Uncertainty ◽  
Future Utility

Lifetime uncertainty represents an additional risk that affects intertemporal choice, because consumers may live longer than expected and run the risk of exhausting the resources accumulated for retirement. Lifetime uncertainty introduces an incentive to consume earlier in life because consumers discount future utility at a higher rate. Second, since in each period there is some positive probability that the consumer will not survive to the next period, the terminal condition on wealth corresponds effectively to a liquidity constraint. Third, with lifetime uncertainty, the decumulation of wealth by the elderly is slower than predicted by the life-cycle model. Finally, the model with lifetime uncertainty generates transfers of wealth across generations even without an express bequest motive, through what we can term involuntary or accidental bequests. The chapter highlights the necessity of accounting for lifetime uncertainty when interpreting empirical age-wealth profiles estimated from microeconomic data.

scholarly journals The Insurance Value of Trade Credit

2019 ◽  
Vol 11 (7) ◽  
pp. 87
Author(s):  
Mario Eboli ◽  
Andrea Toto
Keyword(s):  
Financial Markets ◽  
Financial Constraints ◽  
Trade Credit ◽  
Credit Rationing ◽  
Financial Policy ◽  
Positive Probability ◽  
Optimal Amount ◽  
Liquidity Constraint ◽  
Manufacturing Sectors ◽  
Liquidity Shock

The extensive use of trade credit in all manufacturing sectors, despite its high cost, is an apparent puzzle that economists explain in terms of asymmetric information problems affecting financial markets. The financial constraints arising from credit rationing and limited access to stock markets suffice to induce firms to resort to trade credit as a supplemental source of funding. Nonetheless, empirical evidence shows that also large and liquid firms facing no binding financial constraints use substantial amounts of trade credit. We address this issue by modelling the financial policy of a firm that does not face a binding liquidity constraint but the risk of being constrained in the future. We characterise the optimal amount of trade credit held by such a firm, and we show that a positive probability of facing a liquidity constraint leads the firm to fund its inventories with trade credit, even if cheaper sources of funds are available. The rationale is that trade credit provides implicit coverage against liquidity risk. Therefore, the optimal amount of trade credit grows with the expected size of a possible liquidity shock and with the likelihood of its occurrence.

scholarly journals Poor balance, bilateral upper limb phocomelia, no previous exercise: a challenging combination for fall prevention in a middle-aged thalidomide survivor

2020 ◽  
Vol 13 (1) ◽  
pp. e231345
Author(s):  
Dee Morrison
Keyword(s):  
Fall Prevention ◽  
Adult Life ◽  
Well Being ◽  
The Elderly ◽  
Great Success ◽  
Middle Aged ◽  
Additional Risk ◽  
Exercise Routine ◽  
Gait Abnormalities ◽  
Health And Well Being

Poor balance and falls pose substantial risks to health and well-being. Thalidomide survivors with arm defects have an additional risk being unable to protect themselves in a fall. Generic exercise information to improve strength and balance is increasingly available to the elderly. However, disability can carry a lifetime risk. Identifying and correcting underlying musculoskeletal issues, correction of gait abnormalities together with establishing an appropriate exercise routine that is affordable, convenient and fun should improve outcomes at any stage of adult life. This can be challenging, not least in those who have never previously exercised and who are now middle aged or older. The Thalidomide Trust piloted focused support for a middle-aged thalidomide survivor with bilateral radial club hands and increasing balance issues who had never previously exercised. This met with great success improving his strength, balance, gait and posture together with ensuring an established exercise routine to maintain the improvement.

Who Among the Elderly Owns Stocks? The Role of Cognitive Ability and Bequest Motive

2012 ◽  
Vol 33 (3) ◽  
pp. 338-352 ◽  
Author(s):  
Eun Jin Kim ◽  
Sherman D. Hanna ◽  
Swarn Chatterjee ◽  
Suzanne Lindamood
Keyword(s):  
Cognitive Ability ◽  
The Elderly ◽  
Bequest Motive

The life-cycle model and intertemporal choice

2018 ◽  
Author(s):  
Hans Fehr ◽  
Fabian Kindermann
Keyword(s):  
Life Cycle ◽  
Old Age ◽  
Portfolio Choice ◽  
Intertemporal Choice ◽  
Precautionary Savings ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Risky Assets ◽  
Labour Income ◽  
Uncertain Future

The discussion in the Chapters 3 and 4 centred around static optimization problems.The static general equilibrium model of Chapter 3 features an exogenous capital stock and Chapter 4 discusses investment decisions with risky assets, but in a static context. In this chapter we take a first step towards the analysis of dynamic problems. We introduce the life-cycle model and analyse the intertemporal choice of consumption and individual savings. We start with discussing the most basic version of this model and then introduce labour-income uncertainty to explain different motives for saving. In later sections, we extended the model by considering alternative savings vehicles and explain portfolio choice and annuity demand. Throughout this chapter we follow a partial equilibrium approach, so that factor prices for capital and labour are specified exogenously and not determined endogenously as in Chapter 3. This section assumes that households can only save in one asset. Since we abstract from bequest motives in this chapter, households do save because they need resources to consume in old age or because they want to provide a buffer stock in case of uncertain future outcomes.The first motive is the so-called old-age savings motive while the second is the precautionary savings motive. In order to derive savings decisions it is assumed in the following that a household lives for three periods. In the first two periods the agent works and receives labour income w while in the last period the agent lives from his accumulated previous savings. In order to derive the optimal asset structure a2 and a3 (i.e. the optimal savings), the agent maximizes the utility function . . . U(c1, c2, c3) = u(c1) + βu(c2) + β2u(c3) . . . where β denotes a time discount factor and u(c) = c1−1/γ /1−1/γ describes the preference function with γ ≥ 0 measuring the intertemporal elasticity of substitution.

scholarly journals MPC Heterogeneity and Household Balance Sheets

2021 ◽  
Vol 13 (4) ◽  
pp. 1-54
Author(s):  
Andreas Fagereng ◽  
Martin B. Holm ◽  
Gisle J. Natvik
Keyword(s):  
Life Cycle ◽  
Time Profile ◽  
Income Shocks ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Balance Sheets ◽  
Bequest Motive ◽  
Transitory Income ◽  
Conventional Models ◽  
Over Time

We use sizable lottery prizes in Norwegian administrative panel data to explore how transitory income shocks are spent and saved over time and how households’ marginal propensities to consume (MPCs) vary with household characteristics and shock size. We find that spending peaks in the year of winning and gradually reverts to normal within five years. Controlling for all items on households’ balance sheets and characteristics such as education and income, it is the amount won, age, and liquid assets that vary systematically with MPCs. Low-liquidity winners of the smallest prizes (around US$1,500) are estimated to spend all within the year of winning. The corresponding estimate for high-liquidity winners of large prizes (US$8, 300–150,000) is slightly below one-half. While conventional models will struggle to account for such high MPC levels, we show that a two-asset life cycle model with a realistic earnings profile and a luxury bequest motive can account for both the time profile of consumption responses and their systematic covariation with observables. (JEL D12, D15, E21, G51, H24)

A TRAGEDY OF ANNUITIZATION? LONGEVITY INSURANCE IN GENERAL EQUILIBRIUM

2013 ◽  
Vol 18 (7) ◽  
pp. 1607-1634 ◽  
Author(s):  
Ben J. Heijdra ◽  
Jochen O. Mierau ◽  
S. M. Reijnders
Keyword(s):  
General Equilibrium ◽  
Life Insurance ◽  
Overlapping Generations ◽  
The Elderly ◽  
Positive Probability ◽  
Closed Economy ◽  
Overlapping Generations Model ◽  
Long Run ◽  
Different Types ◽  
Longevity Insurance

We study the microeconomic and macroeconomic effects of longevity insurance. Using a tractable discrete-time overlapping-generations model of a closed economy we first study different types of government redistribution of accidental bequests in general equilibrium. Individuals face longevity risk, as there is a positive probability of passing away before the retirement period. We find nonpathological cases where it is better for long-run welfare to waste accidental bequests than to give them to the elderly. Next we study the introduction of a perfectly competitive life insurance market offering actuarially fair annuities. There exists a tragedy of annuitization: although full annuitization of assets is privately optimal, it is not socially beneficial, because of adverse general equilibrium repercussions.

scholarly journals Observations and reflections based on the experience of elderly caregiving

2016 ◽  
Vol 63 (3) ◽  
pp. 199-204
Author(s):  
Bogdan Constantin ◽  
◽  
Mihaela Ceucă ◽  
Keyword(s):  
Elderly Patients ◽  
Frail Elderly ◽  
Clinical Laboratory ◽  
Functional Decline ◽  
Holistic Approach ◽  
The Elderly ◽  
Terminal Condition ◽  
Geriatric Syndrome ◽  
Unique Experience ◽  
The Rich

Studies dedicated to the process of frailty in geriatrics and gerontology, and also the attempts to individualize a new geriatric syndrome it was a concern in the last years. The authors of this paper, having an unique experience in caring for frail elderly (one of us directly cared frail elderly patients for more than thirty years) have accumulated many observation – clinical, laboratory, nursing and prevention – opportunity for reflection based on author’s opinions. The most important reflection expresses primarily the difficulty to mark off such a syndrome, to have a consensus, which is a condition to integrate a new entity. The rich semiology of elderly patients, the (multi) functional decline inspired over the years many researchers who elaborated nosological descriptions overlapped, more or less to the frailty syndrome. UNO proposed from several years a classification of elderly in the “active elderly” and “frail elderly”. Others described the psycho-motor regression has described as “elder’s multiple vulnerabilities syndrome”. Moreover, frailty is not a specific status of the elderly, but it could be interpreted rather as a “state” than a syndrome, such as bedridden condition, terminal condition, state of dependence, severe stages of dementias and so on. Despite the difficulties of defining the concept of frailty brings some benefit concerning the understanding of the specificity of elderly patient, the holistic approach of his problems, not least provides tools to indicate the need of preventive measures, with good effects on the longevity and the quality of life.

Some Contributions to the Theory of Near-Critical Bisexual Branching Processes

2007 ◽  
Vol 44 (02) ◽  
pp. 492-505
Author(s):  
M. Molina ◽  
M. Mota ◽  
A. Ramos
Keyword(s):  
Branching Process ◽  
Branching Processes ◽  
Sufficient Conditions ◽  
Positive Probability ◽  
Limit Laws ◽  
Bisexual Branching Processes ◽  
Probabilistic Evolution

We investigate the probabilistic evolution of a near-critical bisexual branching process with mating depending on the number of couples in the population. We determine sufficient conditions which guarantee either the almost sure extinction of such a process or its survival with positive probability. We also establish some limiting results concerning the sequences of couples, females, and males, suitably normalized. In particular, gamma, normal, and degenerate distributions are proved to be limit laws. The results also hold for bisexual Bienaymé–Galton–Watson processes, and can be adapted to other classes of near-critical bisexual branching processes.

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