NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Andreas Fagereng

Research Department
Statistics Norway
Pb 8131 Dep.
0033 Oslo, Norway

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NBER Working Papers and Publications

February 2017Firm-Related Risk and Precautionary Saving Response
with Luigi Guiso, Luigi Pistaferri: w23182
We propose a new approach to identify the strength of the precautionary motive and the extent of self-insurance in response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative data and instrument consumption and earnings volatility with the variance of firm-specific shocks. The instrument is valid because firms pass some of their productivity shocks onto wages; moreover, for most workers firm shocks are hard to avoid. Our estimates suggest a coefficient of relative prudence of 2, in a very plausible range.

Published: Andreas Fagereng & Luigi Guiso & Luigi Pistaferri, 2017. "Firm-Related Risk and Precautionary Saving Response," American Economic Review, American Economic Association, vol. 107(5), pages 393-397, May. citation courtesy of

December 2016Portfolio Choices, Firm Shocks and Uninsurable Wage Risk
with Luigi Guiso, Luigi Pistaferri: w22883
Assessing the importance of uninsurable wage risk for individual financial choices faces two challenges. First, the identification of the marginal effect requires a measure of at least one component of risk that cannot be diversified or avoided. Moreover, measures of uninsurable wage risk must vary over time to eliminate unobserved heterogeneity. Second, evaluating the economic significance of risk requires knowledge of the size of all the wage risk actually faced. Existing estimates are problematic because measures of wage risk fail to satisfy the ”non-avoidability” requirement. This creates a downward bias which is at the root of the small estimated effect of wage risk on portfolio choices. To tackle this problem we match panel data of workers and firms and use the variability in the pro...
November 2016Heterogeneity and Persistence in Returns to Wealth
with Luigi Guiso, Davide Malacrino, Luigi Pistaferri: w22822
We provide a systematic analysis of the properties of individual returns to wealth using twenty years of population data from Norway’s administrative tax records. We document a number of novel results. First, in a given cross-section, individuals earn markedly different returns on their assets, with a difference of 500 basis points between the 10th and the 90th percentile. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth. Fourth, returns have an individual permanent component that accounts for 60% of the explained variation. Fifth, for wealth below the 95th percentile, the individual permanent component a...
 
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