Idiosyncratic household income is typically assumed to consist of several components. While the total income is observed and is often modelled as an integrated moving average process, individual components are not observed directly. In the literature, econometricians typically assume that...

In the absence of correlation between net wealth and entrepreneurial talent or risk aversion, net wealth should have an explanatory power in the decision of becoming entrepreneurs only for households that are financially constrained. Further, the importance of net wealth should be higher for the...

We present a heterogeneous-agent model with incomplete markets, in which household debt need to be collateralized by durable holdings and the lowest attainable labor income. Labor income is risky and households decide how much non-durables to consume, on their position of secured debt and the...

This paper studies the optimal trade-off between commitment and flexibility in an intertemporal consumption/savings choice model. Individuals expect to receive relevant information regarding their own situation and tastes - generating a value for flexibility - but also expect to suffer from...

In this paper, we study a household’s optimal life-cycle housing choices by calibrating a model with uninsurable labor income and house price risks. In our setup, the household not only decides between renting and owning a house, but also chooses the size of its house. Borrowing is...

We develop a life-cycle model that captures "absent-mindedness": the fact that many households have only the sketchiest understanding of their pattern of spending. The model generates precautionary spending, whereby absent-minded agents tend to consume more than attentive ones. The model also...

This paper quantifies the size of precautionary savings implied by a dynamic general equilibrium model with heterogeneous agents when explicitly considering the labor supply decision of households. I find that precautionary savings are smaller than if they were measured by use of a model economy...

We study how credit scoring impacts the ability of individuals to consumption smooth. Our environment has ex-ante heterogeneity of household types. Credit scoring is interpreted as an intermediary's posterior of a household's type conditional on its bankruptcy and borrowing decisions. The...

This paper compares wealth portfolios across countries. The household sector in the US and Canada owns much more financial wealth, and much less housing wealth, than the household sector in most of Europe. We address this fact using a calibrated two sector growth model with endogenous financial...

This paper uses a seminonparametric model and Consumer Expenditure Survey data to estimate life cycle profiles of consumption, controlling for demographics, cohort and time effects. In addition to documenting profiles for total and nondurable consumption, we devote special attention to the age...