Labor Supply Flexibility and Portfolio Choice

Zvi Bodie (zbodie@bu.edu) and William Samuelson

No 3043, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a model showing that people who have flexibility in choosing how much to work will prefer to invest substantially more of their money in risky assets than if they had no such flexibility. Viewed in this way, labor supply flexibility offers insurance against adverse investment outcomes. The model provides support for the conventional wisdom that the young can tolerate more risk in their investment portfolios than the old. The model has other implications for the study of household financial behavior over the life cycle. It implies that households will take account of the value of labor supply flexibility in deciding how much to invest in their own human capital and when to retire. At the macro level it implies that people will have a labor supply response to shocks in the financial markets.

Date: 1989-07
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published as "Labor Supply Flexibility and Portfolio Choice in a Life Cycle Model", JEDC, Vol. 16, nos. 3/4 (1992): 427-450.

Downloads: (external link)
http://www.nber.org/papers/w3043.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3043

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3043

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).