In this paper we argue that once one departs from the simple classroom example, or `stripped down life-cycle model,' the empirical model for consumption growth can be made flexible enough to fit the main features of the data. More specifically, we show that allowing demographics to affect...

We add to the small set of studies that investigate adaptation to low income among the poor and extend the analysis to education and health. In accordance with previous studies, we find that beliefs about the amounts of income necessary to get by and live well increase with both own household...