This research proposal consists of two projects on saving and asset allocation over the life cycle. The first project addresses the most severe limitation of the existing economics literature on saving for retirement; namely, the presence of unobserved heterogeneity in the tastes for saving across households. The classic finding is that, conditional on characteristics observable to the investigator, households with pensions do not have lower wealth outside of their pensions than do households without pensions. This finding has been interpreted as evidence for the claim that promoting household saving through employer provided pensions can enhance the retirement income security of current workers. However, if a household has a greater preference for consumption later in life than another household does, then the first will have greater wealth in all forms-pension and nonpension-than will the second. This makes the common interpretation invalid. While many authors have noted that heterogeneity in tastes is a key impediment to their analyses and attempted to control for it, there have been no systematic attempts to model that heterogeneity directly. The first project develops a life cycle model of wealth holding under uncertainty in which the household's rate of time preference captures its taste for saving. The project then uses three separate datasets of wealth holding to estimate the distribution of this parameter. The results of this project will enable future research on saving over the life cycle to control appropriately for this previously omitted factor. While the level of saving for retirement has received considerable attention in the economics literature, the question of how households are investing their retirement savings has gone virtually without comprehensive study. Nonetheless, poor investment choices can lead to inadequate retirement incomes just as readily as inadequate saving rates. The second project begins by extending the standard mean-variance framework of portfolio allocation to allow for differential taxation of assets and investors and for nontradable risky assets, such as human capital and owner-occupied housing. These extended models will then be tested using household wealth data in a generalized method of moments framework. The resulting estimates will provide a basis for understanding the factors that influence household portfolio allocation over the life cycle.
| Landreth, Gary; Jiang, Qingguang; Mandrekar, Shweta et al. (2008) PPARgamma agonists as therapeutics for the treatment of Alzheimer's disease. Neurotherapeutics 5:481-9 |
| Jiang, Qingguang; Heneka, Michael; Landreth, Gary E (2008) The role of peroxisome proliferator-activated receptor-gamma (PPARgamma) in Alzheimer's disease: therapeutic implications. CNS Drugs 22:1-14 |
| Cordle, Andrew; Landreth, Gary (2005) 3-Hydroxy-3-methylglutaryl-coenzyme A reductase inhibitors attenuate beta-amyloid-induced microglial inflammatory responses. J Neurosci 25:299-307 |
