We estimate the marginal propensity to consume (MPC) out of permanent and transitory shocks to house price appreciation. We consider two different models under which those shocks may affect consumption. In the first one, housing is a risky asset. In the second one, housing has a role as a...

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...

We study the asset pricing implications of a general equilibrium Lucas endowment economy inhabited by two agents with habit formation preferences. Preferences are modeled either as internal or external habits. We allow for agents' heterogeneity in relative risk aversion and habit strength. We...

This paper studies the link between rising income uncertainty and household fertility patterns in an Aiyagari-Bewley-Huggett framework augmented to include fertility decisions and infertility risk. Building on Becker and Tomes (1976), I model fertility decisions as sequential, irreversible...

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...

Households who wish to extract home equity through refinancing their mortgage face a hidden transaction cost. The real value of the fixed nominal mortgage payment declines over time with inflation. The change in the real value of the mortgage payments from taking on a new mortgage is positive...

We propose a novel approach to estimate household income uncertainty at various future horizons and characterize how the estimated uncertainty evolves over the life cycle. We measure income uncertainty as the variance of linear forecast errors conditional on information available to households...

Partial and reverse retirement are two key behaviors characterizing labor force dynamics for individuals at older ages, with half working part-time and over a third leaving and later re-entering the labor force. The high rate of exit and re-entry is especially surprising given the declining wage...