We study whether households can distinguish persistent from transitory income shocks, and the implications for consumption-saving behavior. We construct a novel consumption-saving model where the household must infer the persistent component of its income process from actual income realizations...

We estimate capital and labor income Pareto exponents across 348 country-year observations that span 51 countries over half a century. We document two stylized facts: (i) capital income is more unequally distributed than labor income; namely, the capital exponent (1-3) is smaller than labor...

A criticism of earnings risk models of wealth inequality is that they do not accurately capture individual's earnings risks. I construct a stochastic process that directly determines workers earnings. I use a set of new empirical moments to match moments of earnings changes in the universe of...

This paper measures risk in the present value of workers’ remaining lifetime earnings. Building upon a common earnings specification, our estimate combines flexible, heterogeneous forecasts of individuals’ expected earnings growth rates and the variances of potential permanent and temporary...

This paper empirically examines the behavioral precautionary saving hypothesis by Koszegi and Rabin (2009) stating that uncertainty about future income triggers saving because of loss aversion. We extend their theoretical analysis to also consider the internal margin, i.e., the strength, of loss...

We study the role played by the standard of living during childhood on nest leaving. Using data from SHARE, we show empirically that individuals who grew up in a golden nest leave the parental home later and that education only partially mediates this effect. This relationship holds across...

Analyses of savings rates needed for successful retirement rates (SSRs) typically assume constant real earnings growth throughout one's career. However, data on the life-cycle earnings patterns of millions of U.S. workers suggest that earnings growth does not occur at a constant rate that...

To effectively cope with an unexpected, large, and negative income shock, I propose a life-cycle model for income risk management. I analyze the intertemporal consumption-investment problem in an incomplete market. I suggest a hybrid of the martingale approach and the dynamic programming...

This paper examines the interaction between altruism towards offspring and precautionary savings. It investigates whether increased uncertainty in children labor income fosters savings of parents. We first construct a two-periods and two-generations model, to underline which are the mechanisms...

This paper empirically examines the behavioral precautionary saving hypothesis by Koszegi and Rabin (2009) stating that uncertainty about future income triggers saving because of loss aversion. We extend their theoretical analysis to also consider the internal margin, i.e., the strength, of loss...