Beschreibung:
We propose a life-cycle model, where individuals facing uninsured labor income risks choose whether to participate in the stock market and make decisions on home ownership, in an environment with a social safety net and the retirement savings system. The model is motivated by the empirical finding that active stock market participation is associated with a higher level of education and employment experience in the finance sector. The model exhibits a good fit on portfolio choice, home ownership, and consumption pattern in the cross-section and through life-cycle. We find that the lack of stock market access, approximated by a fixed entry cost and variable costs, plays a crucial role in generating heterogeneous outcomes in agents' wealth accumulation, increasing wealth inequality