This paper estimates the importance of temptation (Gul and Pesendorfer, 2001) for consumption smoothing and asset accumulation in a structural life-cycle model. We use two complementary estimation strategies: first, we estimate the Euler equation of this model; and second we match liquid and...

Over much of the past 25 years, the cycles of house price and consumption growth have been closely synchronised. Three main hypotheses for this co-movement have been proposed in the literature. First, that an increase in house prices raises households' wealth, particularly for those in a...

This paper shows that a power utility specification of preferences over total expenditure (ie. CRRA preferences) implies that intratemporal demands are in the PIGL/PIGLOG class. This class generates (at most) rank two demand systems and we can test the validity of power utility on cross-section...

Much of the focus of the UK pensions policy debate over the past decade has been on the adequacy (or otherwise) of private retirement saving. In this paper, we present the first assessment of the optimality of the retirement resources of English couple households born in the 1940s. Here,...

Using a model where households can save in either a safe asset or in an illiquid, tax-advantaged pension, we assess the extent to which those who recently reached the state pension age in the UK have saved optimally for retirement. The policy environment specified closely matches that prevailing...

This paper suggests a method for estimating the distribution of discount rates using panel data on income and wealth. Using the English Longitudinal Survey of Ageing (ELSA), a representative sample of the English popularion over age 50, we general panel date on total consumption from the...

The aim of this paper is to understand what a recession means for individual consumers, and to model in a life-cycle framework how individuals respond to recessions. Our focus is on the sharp increase in savings rates that have been observed in the current and recent recessions. We show...

The vast majority of household wealth in the U.S. is held in illiquid assets, primarily housing, making households vulnerable to unexpected income shocks. To rationalize this preference for illiquidity, we build a life-cycle model where households are tempted to consume their liquid wealth but...

I characterize how house price shocks affect consumption inequality using a life-cycle model of housing and non-housing consumption with incomplete markets. I derive analytical expressions for the dynamics of inequalities and use these to analyze large house prices swings seen in the UK. I show...

This paper uses the large and heterogeneous house price shocks in Denmark from 2006-2009 to provide new evidence on the contested determinants of the correlation between house prices and saving. Crucially, to compare the savings behaviour of home-owners who experienced di fferent house price...