Transitional dynamics in growth models have been subject to much attention recently. With a few exceptions, existing studies rely on computational techniques. This paper uses a set of examples to illustrate that qualitative insights on the transitional dynamics can be gained at the expense of...

We use CEX repeated cross-section data on consumption and income, to evaluate the nature of increased income inequality in the 1980s and 90s. We decompose unexpected changes in family income into transitory and permanent, and idiosyncratic and aggregate components, and estimate the contribution...

This paper investigates whether the inclusion of housing in a household portfolio is important to the household’s intertemporal decision making. Households hold portfolios of assets rather than a Treasury bill and/or a stock index and make their spending decisions based on expected total...

This paper investigates whether the rate of interest such as the Treasury bill rate or the rate of return such as the return on a household portfolio is more relevant to the household’s intertemporal decision making. In a current era, households are diversifiers (to use Tobin’s 1958 term)...

We investigate the role that self-control problems modeled as time-inconsistent, present-biased preferences and a person's awareness of those problems might play in leading people to develop and maintain harmful addictions. Present-biased preferences create a tendency to over-consume addictive...

People underappreciate how their own behavior and exogenous factors affect their future utility, and thus exaggerate the degree to which their future preferences resemble their current preferences. We present evidence which demonstrates the prevalence of such projection bias, and develop a...

Sophisticated agents with self-control problems value commitment devices that constrain future choices. Using Australian household data, I test whether these households value commitment devices in the form of illiquid pension contributions. Applying various probabilistic choice models, the...

This paper explores the consequences of skill biased technological progress on the savings rates. The literature, both theoretical and empirical, on the causes and consequences of skill biased technological progress in the past few years has burgeoned considerably. So has the literature on...

In this paper we show that the solution to the standard consumer maximisation problem which is augmented by habit-persistence can imply a positive and linear relationship between changes in the level of savings and changes in present income. We show that these savings-income dynamics contrast...

The current literature offers two views on the nature of the income process. According to the first view, which we call the “restricted income profiles” (RIP) model (MaCurdy, 1982), individuals are subject to large and very persistent shocks, while facing similar life-cycle income profiles...