Recent research has documented that income inequality in the United States has increased dramatically over the prior three decades. There has been less of a consensus, however, on whether the increase in income inequality was matched by an equally large increase in consumption inequality. Most...

The effectiveness of tax-favored savings accounts in raising national savings depends crucially upon the willingness of households to reduce consumption in order to finance contributions to these accounts. The debate over the tax deductibility of IRA's has centered on whether IRA contributions...

We investigate the empirical significance of borrowing constraints in the market for consumer loans. We set up a theoretical model of consumer loan demand, which in the presence of credit rationing implies restrictions on the elasticities of loan demand with respect to the interest rate and the...

Liquidity constraints and, more generally, imperfections in credit markets, can be extremely important for the intertemporal allocation of consumption and have received a substantial amount of attention in the theoretical and empirical literature on consumption. In the first part of the paper I...

In this paper we analyze the link between people's "subjective" expectations of returns to schooling and their decision to invest into schooling. We use data from a household survey on Mexican junior and senior high school graduates that elicits their own and their parents' beliefs about future...

We derive testable implications of model in which first best allocations are not achieved because of a moral hazard problem with hidden saving. We show that in this environment agents typically achieve more insurance than that obtained under autarchy via saving, and that consumption allocation...

We analyze how relative wage movements across birth cohorts and education groups during the 1980s affected the distribution of household consumption. The analysis integrates the labor economics literature on time variation in the wage structure with the consumption insurance literature. In...

Youth unemployment in Latin America is exceptionally high, as much as 50% among the poor. Vocational training may be the best chance to help unemployed young people at the bottom of the income distribution. This paper evaluates the impact of a randomized training program for disadvantaged youth...

In this paper we propose a method to characterize the time series properties of individual consumption, income and interest rates using micro data, as studies in labour economics have characterized the time series properties of hours and earnings. Our approach, however, does not remove aggregate...