Idiosyncratic labor incomes are typically modeled either by stochastic processes with heterogeneous income profiles (HIPs) or restricted income profiles (RIPs). The HIP assumes that individual labor income grows deterministically at an unobserved rate and contains a persistent but stationary...

Are households more likely to be homeowners when “housing risk” is higher? We show that home-ownership rates and loan-to-value (LTV ) ratios at the city level are strongly negatively correlated with local house price volatility. However, causal inference is confounded by house price levels,...

We propose a new category of consumption goods, memorable goods, that generate a utility flow even after physical consumption. Empirically, memorable goods expenditures exhibit frequent zero monthly purchases and lumpy expenditure spikes. Memorable goods expenditures are 20% the size of...

We propose and estimate a model of family job search and wealth accumulation with data from the Survey of Income and Program Participation (SIPP). This dataset reveals a very asymmetric labor market for household members who share that their job finding is stimulated by their partners' job...

This paper shows that the consumption‐based capital asset pricing model (C-CAPM) with low‐probability disaster risk rationalizes pricing errors. We find that implausible estimates of risk aversion and time preference are not puzzling if market participants expect a future catastrophic change...

We propose a new approach to analyze economic shocks. Our new procedure identifies economic shocks as exogenous shifts in a function; hence, we call them "functional shocks." We show how to identify such shocks and how to trace their effects in the economy via VARs using "VARs with functional...

We construct, and then estimate by maximum likelihood, a tractable dynamic stochastic general equilibrium model with incomplete insurance and heterogenous agents. The key feature of our framework is that cross-sectional heterogeneity remains finite dimensional. The solution to the model thus...

I structurally estimate an incomplete markets life-cycle model with endogenous labor supply using data on the joint distribution of wages, hours, and consumption. The model is successful at matching the evolution of both the first and second moments of the data over the life cycle. The key...

This paper aims to fill the gaps in the analysis of risk‐sharing channels at the microlevel, both within and across households. Using data from the Bank of Italy's Survey on Household Income and Wealth covering the financial crisis, we are able to quantify in a unified and consistent framework...

This paper assesses the quantitative impact of ambiguity on historically observed financial asset returns and growth rates. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and dividends next period as ambiguous. We calibrate the agent's...