Was the increase in income inequality in the US due to permanent shocks or merely to anincrease in the variance of transitory shocks? The implications for consumption and welfaredepend crucially on the answer to this question. We use CEX repeated cross-section data onconsumption and income to...

Using the Chinese urban household survey data between 1997 and 2006, we find that income inequality has a negative (positive) impact on households’ consumption (savings), even after we control for family income. We argue that people save to improve their social status when social status is...

In the quantitative macro literature, single agent models are heavily used to explain "per-adult equivalent" household data. In this paper, we study differences between consumption predictions from a single agent model and "adult equivalent" consumption predictions from a model where household...

In the quantitative macro literature, single agent models are heavily used to explain "per-adult equivalent" household data. In this paper, we study differences between consumption predictions from a single agent model and "adult equivalent" consumption predictions from a model where household...

In the quantitative macroeconomics literature, single agent models are widely used to explain ``per-adult equivalent'' data, which are obtained at the household level. In this paper we suggest a simple framework to understand the sources of bias when these models are used to make predictions for...

This paper investigates the existence and degree of variation across house holds and over time in the intertemporal elasticity of substitution (IES) and the coefficient of relative risk aversion (RRA) that is generated by habit forming preferences. To do so, we develop a new nonlinear GMM...

Although the link between household size and consumption has a strong empirical support, there is no consistent way in which demographics are dealt with in standard life-cycle models. We study the relationship between the predictions of the Single Agent model (the standard in the literature)...

To analyze the effectiveness of stabilization policies which includes effects on households future income it is central to account for anticipation effects on consumption. We investigate this using high-frequency spending and balance sheet data from a major Danish bank. We examine the behavior...

Unique administrative data on a representative population's cognitive abilities, spending, and financials reveal that consumers at or below median cognitive abilities barely react when their incentives to spend or borrow change, even if they earn high incomes and are financially unconstrained...

Modern consumer theories are built upon the premise of the forward looking behavior of households. While most of the empirical studies at micro level are based on Euler equation, there have been few to estimate the household consumption function and test the implication of forward looking...