The focus of this paper is to analyze the effect that ambiguity will have on the buyer's reservation price and the value of the option to purchase the durable good with an embedded option to resell it. The agent is assumed to be risk neutral and ambiguity averse. The problem is formulated as an...

This paper considers the quantitative role of growth in the size of the social security program in contributing to the collapse of personal saving in the U.S. over the last few decades. Using a calibrated, general equilibrium life-cycle model this paper shows that social security may not be to...

We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income,...

We use a welfare-based intertemporal stochastic optimization model and historical data to estimate the size of the optimal intergenerational and liquidity funds and the corresponding resource dividend available to the government of the Canadian province Alberta. To first-order of approximation,...

There exists an extensive literature estimating idiosyncratic labor income processes. While a wide variety of models are estimated, GMM estimators are almost always used. We examine the validity of using likelihood based estimation in this context by comparing the small sample properties of a...

This paper quantifies the welfare implications of the U.S. Social Security program during the Great Recession. We find that the average welfare losses due to the Great Recession for agents alive at the time of the shock are notably smaller in an economy with Social Security relative to an...

We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway's administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their...

Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We exploit a unique natural experiment for an empirical test of the effectiveness of...

In this paper household level data are used to explore whether unemployment risk is an important factor in the timing of consumers' durable goods purchase decisions. A theoretical model is presented in which both income uncertainty and household debt play a direct role, offering a potential...

Consumption growth is predictable, a basic violation of the permanent-income hypothesis. This paper examines three possible explanations: rule-of-thumb behavior, in which households allow consumption to track per-period income flows rather than permanent income; habit persistence; and...