Models of dynastic households have been traditionally used to analyze persistence in earnings and wealth across generations, more recently to study patterns of wealth and fertility, transfers to children and education choices. However most of those models have looked at the theoretical outcomes...

In the economic literature there are divergences on a number ofissues between the results obtained with macro- and micro-basedmodels. Habit formation in consumption is one example of suchdisagreement. Another example is the discrepancy between thetheoretical prediction that all investors should...