With industry-specific human capital, the value of life-cycle portfolio choice varies across otherwise identical households employed in different industries. To quantify the extent of this variation, I solve a life-cycle model for households employed in 73 industries at the three-digit NAICS classification level. Applying the Method of Moments to time series of industry-specific income growth and aggregate stock returns, allows me to solve the Euler equations without specifying the distribution of these variables and to consider predictability. At 20-year horizon, the smallest and highest certainty-equivalent consumption estimates, obtained for industries associated with Hollywood and Wall Street, respectively, deviate by more than 10 percent from the median. I explain the cross-sectional variation in certainty-equivalent consumption with moments of industry-specific income growth and its cross-moments with aggregate stock returns. The first two moments of real income growth have strong explanatory power while higher-order moments and cross-moments, including correlation and newly proposed measures of business cycle variation in labor income risk, hardly matter.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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