TY - JOUR
T1 - Household finance over the life-cycle
T2 - What does education contribute?
AU - Cooper, Russell
AU - Zhu, Guozhong
N1 - Publisher Copyright:
© 2015 Elsevier Inc..
PY - 2016/4/1
Y1 - 2016/4/1
N2 - This paper studies household financial choices: why are these decisions dependent on the education level of the household? A life-cycle model is constructed to understand a rich set of facts about decisions of households with different levels of educational attainment regarding stock market participation, the stock share in wealth, the stock adjustment rate and the wealth-income ratio. Model parameters, including preferences, the costs of stock market participation and portfolio adjustment, are estimated to match financial decisions by different education groups. Based on the estimated model, education affects household finance mainly through increased average income. The estimation also finds evidence that higher educational attainment is associated with a lower stock market entry cost and a larger discount factor. Education specific differences in income risks, medical expenses, mortality risks and the life-cycle pattern of income explain relatively little of the observed differences in household financial choices.
AB - This paper studies household financial choices: why are these decisions dependent on the education level of the household? A life-cycle model is constructed to understand a rich set of facts about decisions of households with different levels of educational attainment regarding stock market participation, the stock share in wealth, the stock adjustment rate and the wealth-income ratio. Model parameters, including preferences, the costs of stock market participation and portfolio adjustment, are estimated to match financial decisions by different education groups. Based on the estimated model, education affects household finance mainly through increased average income. The estimation also finds evidence that higher educational attainment is associated with a lower stock market entry cost and a larger discount factor. Education specific differences in income risks, medical expenses, mortality risks and the life-cycle pattern of income explain relatively little of the observed differences in household financial choices.
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U2 - 10.1016/j.red.2015.12.001
DO - 10.1016/j.red.2015.12.001
M3 - Article
AN - SCOPUS:84960146263
SN - 1094-2025
VL - 20
SP - 63
EP - 89
JO - Review of Economic Dynamics
JF - Review of Economic Dynamics
ER -