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LOCATION:HG D 1.2
DTSTART;TZID=Europe/Stockholm:20240605T130000
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UID:submissions.pasc-conference.org_PASC24_sess110_msa124@linklings.com
SUMMARY:The General Equilibrium Implications of Retirement Saving Dynamics
DESCRIPTION:Minisymposium\n\nAdam Zhang (University of Minnesota, Departme
 nt of Finance)\n\nThis 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 d
 ynamics of macro aggregates, equity and bond returns, as well as wealth an
 d portfolio concentration. A counterfactual experiment shows how widesprea
 d adoption of target date funds would improve risk sharing, reduce inequal
 ity, and generate substantial welfare gains for households in the bottom 9
 0% of wealth distribution. The equity premium drops from 6.3% to 2.5%, whi
 le the standard deviation of equity returns stabilizes from 24.7% to 15.2%
 . Full adoption of target date funds would generate around 20% average wel
 fare 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. Asse
 t pricing and welfare outcomes are very close between an economy with targ
 et date funds and one without any participation costs or rebalancing frict
 ions.\n\nDomain: Applied Social Sciences and Humanities, Computational Met
 hods and Applied Mathematics\n\nSession Chairs: Aleksandra Friedl (ifo Ins
 titut), Simon Scheidegger (University of Lausanne), and Yucheng Yang (Univ
 ersity of Zurich)
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