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 combination of credit constraints and indivisible consumption goods may induce some riskaverse individuals to play lotteries to have a chance of crossing a purchasing threshold. One implication of this is that income effects for individuals who choose to play lotteries are likely to be...