Modigliani's Life Cycle Theory Essay
Life-cycle hypothesis are developed by Ando & Modigliani (1963) to help economists to understand the dynamic behaviour of consumers and solve economic decision on retirement savings regarding the rationalization of an individual’s income. The hypothesis is designed to maximize the utility of one’s income over his lifetime. Figure 2.1 Life-cycle model to predict saving behaviour Source: Rayat, R., Scott, S., Mullen, E., & Chen, Y. (2015) Modigliani's Life Cycle Theory of Consumption. Retrieved August 5, 2016 from https://rpubs.com/RAAJ/110886 Figure 2.1 provides a graphical representation. The saving area during the work phase represents the employees’ positive savings in the expectation of the future retirement (Pistaferri, 2009). While, the dissaving area during the retirement phase represents the …show more content…
They proved that such programs will less benefits to respondents with low income or low education level. They also conclude that short-term financial education programs are unlikely to dramatically alter savings of young age, they are more effective to those who at peak saving years (e.g., post-age 40). The statement was supported by the study that showed financial education helps employees around the age of 40 to raise retirement savings by close to 10% In Love (2010)’s study, he examines the impact of marital status on saving and portfolio choice with life cycle model. The result showed that marital status transitions have significant effects on the optimal household decision. The model proposed that marital status may be a significant determinant of savings and portfolio choice. The result above is tested using the panel date from the Health and Retirement Study (HRS) and the Panel Study on Income dynamics
Pension Plans: GASB Vs. FASB
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Rhetorical Analysis Of Is It Still Worth Going To College
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Belback Analysis
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Personal Narrative: A Career As A Feed Yard Employee
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Great Depression DBQ Essay
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College Debt In College Essay
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Effects Of Income Inequality In The United States
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Should Financial Literacy Be Taught In Schools Essay
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