Although the life cycle/permanent income hypothesis is the primary framework for understanding household consumption and savings decisions, only a few studies have used clearly identifiable income changes to test the basic predictions of the model. The estimates produced using this empirical...

Previous research finds a systematic decrease in consumption at retirement, a finding that is inconsistent with the life cycle/permanent income hypothesis if retirement is an expected event. In this paper, we use workers' subjective beliefs about their retirement dates as an instrument for...

Although prior studies of job displacement and disability have measured the impact of these shocks in terms of lost earnings, no previous research has linked these permanent earnings shocks to the long-run consumption smoothing behavior of these households. Because consumption is generally...

Although the theoretical importance of expectations in decision-making is well known to economists, only a few empirical papers investigate the impact of individual subjective expectations on economic outcomes. This paper examines the link between expectations of future job losses and the...