NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Portfolio Diversification and Labor/Leisure Choice

Urban J. Jermann

NBER Working Paper No. 6382*
Issued in January 1998
NBER Program(s):   AP    IFM

When marginal utility of consumption depends on leisure, investors will take this into account when allocating their wealth among different assets. This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor-leisure and consumption are chosen endogenously. We use this framework to study the effect of leisure for optimal international diversification. We find that in the symmetric case the model's ability to help explain home-bias depends crucially on the level of substitutability between consumption and leisure.

*Published: Jermann, Urban J. "International Portfolio Diversification And Endogenous Labor Supply Choice," European Economic Review, 2002, v46(3,Mar), 507-522.

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