The paper compares implications of three kinds of models of households’ consumption behavior: the basic permanent-income model, several models of liquidity-constrained households, and a model of an informationally-constrained efficient contract. These models are distinguished in terms of...

This article concerns decentralized trading and efficiency. As in Gale (1986a, b), traders transfer endowments of divisible goods in random, pairwise meetings that take place in discrete time. Anonymity and absence of time preference forestall strategic power. As in Kiyotaki and Wright (1989),...

This paper considers model worlds in which there is a continuum of individuals who form finite-sized associations to undertake joint activities. We show how, through a suitable choice of commodity space, restrictions on the composition of feasible groups can be incorporated into the...

Using U.S. data it is shown that as the stock market goes into a period of high volatility, nondurables consumption is unaffected but durables consumption falls substantially. It is argued that a plausible explanation for this is that consumers face irreversibilities when adjusting their...

This paper documents several advantages associated with using state level consumption data to examine consumption behavior and especially to estimate the Intertemporal Elasticity of Substitution (IES). In contrast to the results of Hall (1988) and Campbell and Mankiw (1989), we provide...

We consider four models of consumption that differ with respect to efficient risk-sharing and altruism. They range from complete markets with altruism to family risk-sharing. We use a matched sample of parents and independent children available from the Panel Study of Income Dynamics to...

A Beckerian model of household production is developed to study the allocation of capital and time between market and home activities over the business cycle. The adopted framework treats the business and household sectors symmetrically. In the market, labor interacts with business capital to...

In this paper, we construct a parsimonious overlapping-generations model of human capital accumulation and study its quantitative implications for the evolution of the U.S. wage distribution from 1970 to 2000. A key feature of the model is that individuals differ in their ability to accumulate...

This paper studies consumption and labor supply in a model where agents have partial insurance and face risk and initial heterogeneity in wages and preferences. Equilibrium allocations and variances and covariances of wages, hours and consumption are solved for analytically. We prove that all...