The Roles of Temptation and Social Security in Explaining Individual Behavior

Alessandro Bucciol

No 32, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: I simulate a life-cycle model with preferences described by a utility function a' la Gul and Pesendorfer (2001). I show that temptation to consume contributes to explain the saving, retirement consumption, and asset allocation puzzles. I perform two analyses, with and without Social Security protection, separately for the US and Italy. The pension replacement rate is endogenous in the model and varies with income realizations. The results also show that the optimal behavior differs remarkably between the two countries when Social Security is considered. In particular, the more generous Italian system depresses savings and investments of more tempted individuals.

JEL-codes: D91 E21 G11 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2006-12
New Economics Papers: this item is included in nep-dge, nep-mac and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0032

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