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Labor supply flexibility and portfolio choice in a life cycle model (1992)
| Citations: | 353 - 8 self |
BibTeX
@MISC{Bodie92laborsupply,
author = {Zvi Bodie and Robert C. Merton and William F. Samuelson},
title = {Labor supply flexibility and portfolio choice in a life cycle model},
year = {1992}
}
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Abstract
This paper examines the effect of the labor-leisure choice on portfolio and consumption decisions over an individual’s life cycle. The model incorporates the fact that individuals may have considerable flexibility in varying their work effort (including their choice of when to retire). Given this flexibility, the individual simultaneously determines optimal levels of current consumption, labor effort, and an optimal financial investment strategy at each point in his life cycle. We show that labor and investment choices are intimately related. The ability to vary labor supply ex post induces the individual to assume greater risks in his investment portfolio ex ante.
Keyphrases
labor supply flexibility portfolio choice national bureau economic research vary labor supply investment choice post induces labor-leisure choice investment portfolio ex ante work effort life cycle considerable flexibility consumption decision optimal level optimal financial investment strategy individual life cycle labor effort current consumption
