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Pension Portfolio Choice and Peer Envy


  • Jacqueline Volkman Wise

    1. Jacqueline Volkman Wise is at the Fox School of Business, Temple University, 619 Alter Hall, 1801 Liacouras Walk, Philadelphia, PA 19122. The author can be contacted via e-mail: The author would like to thank Alexander Muermann, Richard A. Derrig, Neil Doherty, Jim Garven, Howard Kunreuther, Olivia S. Mitchell, Harris Schlesinger, Stephen Shore, Betsey Stevenson, Geoffrey Tate, Joel Waldfogel, Matt White, participants in the Rosen–Huebner–McCahon Seminar Series at the Wharton School, and two anonymous referees for their helpful comments and suggestions.
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I examine the effect of envy on the portfolio allocation of workers in a defined contribution (DC) pension plan. If a worker’s DC plan performs better than his co-worker’s, he may gloat; on the other hand, if his DC plan performs worse, he may feel envy. I model anticipated envy when workers make portfolio allocations, and find that in equilibrium, workers will mimic their co-worker’s allocation to eliminate the disutility from envy. This portfolio allocation is riskier than that of a worker who does not exhibit envy.