The wealthy hand-to-mouth are households who hold little or no liquid wealth (cash, checking, and savings accounts), despite owning sizable amounts of illiquid assets (assets that carry a transaction cost, such as housing or retirement accounts). We use survey data on household portfolios for...

Drawing on and extending the theory of human capital, a comprehensive life-cycle model of individual earnings is designed. The approach taken permits an isolated analysis of three interconnected levels of aggregation (intra-cohort distribution, overall distribution, and lifetime distribution)...

A wide body of empirical evidence, based on randomized experiments, finds that 20-40 percent of fiscal stimulus payments (e.g. tax rebates) are spent on non-durable household consumption in the quarter that they are received. We develop a structural economic model to interpret this evidence. Our...

A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast, findings from social...

The rise in inequality and poverty is one of the most important economic and social issues in recent times. But in contrast to the literature on individual earnings inequality, there has been little work modelling (as opposed to documenting) household income dynamics. This is largely because of...

This Paper explores the implications of the recent sharp rise in US wage inequality for welfare and the cross-sectional distributions of hours worked, consumption and earnings. From 1967 to 1996 cross-sectional dispersion of earnings increased more than wage dispersion, due to a rise in the...

This Paper analyses the persistence of poverty in Sweden using a hazard rate model based on multiple spells. The model also accounts for unobserved heterogeneity and possibly endogenous initial conditions. We estimate the model on a large representative Swedish panel dataset, LINDA, for the...

Wealthy individuals often voluntarily provide public goods that the poor also consume. Such philanthropy is perceived as legitimizing one’s wealth. Governments routinely exempt the rich from taxation on grounds of their charitable expenditure. We examine the normative logic of this exemption....

Efficient measures are often not implemented because of their potentially damaging effects on distribution, yet these distributional effects are scarcely studied in economics because of the idea that they are case specific. In this paper we show that when we can separate the effect on efficiency...

We show that direct investments by consumers without the use of financial intermediaries can efficiently allocate financial capital to firms seeking funding for production of a novel consumption good. In our setting, consumers are also investors, and their privately known consumption preferences...