TY  - JOUR
AU  - Bodie,Zvi
AU  - Samuelson,William
TI  - Labor Supply Flexibility and Portfolio Choice
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3043
PY  - 1989
Y2  - July 1989
UR  - http://www.nber.org/papers/w3043
L1  - http://www.nber.org/papers/w3043.pdf
N1  - Author contact info:
Zvi Bodie
School of Management, room 534
Boston University
595 Commonwealth Ave.
Boston, MA   02215
Tel: 617-353-4160
E-Mail: zbodie@bu.edu

William Samuelson
E-Mail: wsamuels@bu.edu
AB  - 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.
ER  -