We use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay to buy a risky security. We relate this measure to consumers' endowment and attributes and to measures of background risk and liquidity constraints. We...

Abstract: Focusing on observable default risk's role in loan terms and the subsequent consequences for household behavior, this paper shows that lenders increasingly used risk-based pricing of interest rates in consumer loan markets during the mid-1990s. It tests three resulting predictions....

Saving rates have fallen steadily in the U.S. since the 1970s. The literature has proposed numerous possible explanations for the decrease including increases in governmental insurance, changes in the distribution of income, and increases in annuitized wealth. Analysis of all three explanations...

This paper studies optimal taxation of entrepreneurial capital and financial assets in economies with private information. Returns to entrepreneurial capital are risky and depend on entrepreneurs' effort, which is not observed. The presence of idiosyncratic risk in capital returns implies that...

This paper provides a theory of government intervention, such as government ownership, regulation, mandatory public schooling, subsidies, and industrial policy, as an optimal policy response due to the inability to commit not to expropriate private investment or bail agents out. If the...

We study the volatility of growth rates and find that it differs systematically across countries. Our empirical investigation reveals that there is a high correlation between disparity in political regimes across countries and differences in volatility. This is not the case for some of the...