Presentation
The General Equilibrium Implications of Retirement Saving Dynamics
Presenter
DescriptionThis paper quantifies the general equilibrium effects of financial innovation that increases access to equity markets. I study an overlapping generations model with both idiosyncratic and aggregate risk, solved with machine learning techniques. A benchmark economy with limited stock market participation and rebalancing frictions matches the current dynamics of macro aggregates, equity and bond returns, as well as wealth and portfolio concentration. A counterfactual experiment shows how widespread adoption of target date funds would improve risk sharing, reduce inequality, and generate substantial welfare gains for households in the bottom 90% of wealth distribution. The equity premium drops from 6.3% to 2.5%, while the standard deviation of equity returns stabilizes from 24.7% to 15.2%. Full adoption of target date funds would generate around 20% average welfare gains for people in the bottom 90% at the expense of the top 10% who lose by more than 50% through the redistribution of financial wealth. Asset pricing and welfare outcomes are very close between an economy with target date funds and one without any participation costs or rebalancing frictions.
TimeWednesday, June 513:00 - 13:30 CEST
LocationHG D 1.2
Session Chairs
Event Type
Minisymposium
Applied Social Sciences and Humanities
Computational Methods and Applied Mathematics