Saving Rates and Portfolio Choice with Subsistence Consumption
Sylwia Hubar and
Christos Koulovatianos ()
Review of Economic Dynamics, 2012, vol. 15, issue 1, 108-126
We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the higher fraction of personal wealth held in risky assets by the rich, and (iii) the higher volatility of consumption of the wealthier. On the contrary, time-variant "keeping-up-with-the-Joneses" weighted average consumption which plays the role of moving benchmark subsistence consumption gives the same portfolio composition and saving rates across the rich and the poor, failing to reconcile the model with what micro data say. (Copyright: Elsevier)
Keywords: Elasticity of intertemporal substitution; Stone-Geary preferences; Two-asset portfolio; Household portfolios; Wealth inequality; Controlled diffusion (search for similar items in EconPapers)
JEL-codes: D11 D14 D81 D91 E21 G11 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20) Track citations by RSS feed
Downloads: (external link)
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.
Software Item: Code and data files for "Saving Rates and Portfolio Choice with Subsistence Consumption" (2011)
Working Paper: Online Appendix to "Saving Rates and Portfolio Choice with Subsistence Consumption" (2011)
Working Paper: Saving rates and portfolio choice with subsistence consumption (2011)
Working Paper: Saving Rates and Portfolio Choice with Subsistence Consumption (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:issued:10-11
Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/
Access Statistics for this article
Review of Economic Dynamics is currently edited by Loukas Karabarbounis
More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().