Recent research has shown that the "spirit of capitalism"¡ªa preference for wealth itself, in addition to consumption¡ªhas important implications for growth and asset pricing. This paper explores how the spirit of capitalism affects saving and consumption behavior. We demonstrate that the...

We revisit the role of social security in countering inadequate saving for retirement. We compute the optimal social security tax rate for households who lack the computational ability to solve dynamic optimization problems. Instead, they follow the simple rule of thumb of consuming and saving a...

Some empirical studies firmly reveal that people tend to form overly pessimistic survival expectations for relatively less distant ages and overly optimistic survival expectations for relatively more distant ages. We incorporate this observation into a life-cycle continuous time...

The world economy is riven by very large imbalances, with the U.S. economy exhibiting high levels of consumption but low savings ratios and a high current account deficit while China provides the mirror opposite. In this paper, we explore the structural causes of these imbalances that underpin...

This paper analyzes the effects of children on income, con sumption and saving profiles for Mexican families. We use the Life Cycle Model that allow us to follow the families behavior along his life cycle, while our empirical work is based on synthetic panels as pro posed by Browning, Deaton and...