This paper analyses the welfare effects of changes in cross-sectional wage dispersion, using a class of tractable heterogeneous-agent economies. We emphasize a trade-off in the welfare calculation that arises when labour supply is endogenous. On the one hand, as wage uncertainty rises, so does...

This paper studies consumption and labor supply in a model where agents have partial insurance and face risk and initial heterogeneity in wages and preferences. Equilibrium allocations and variances and covariances of wages, hours and consumption are solved for analytically. We prove that all...

This Paper explores the implications of the recent sharp rise in US wage inequality for welfare and the cross-sectional distributions of hours worked, consumption and earnings. From 1967 to 1996 cross-sectional dispersion of earnings increased more than wage dispersion, due to a rise in the...

The role of households in the non market production and the importance of the household production has come topical in the last few years as a result of studies on the measurement of economic well-being of society. Non-market household production covers the goods and services household members...

Traditional economic theory predicts that unfunded social security can be justified on the basis of its ability to efficiently finance retirement, and also for its ability to provide insurance against mortality risk and uninsurable shocks to labor income. In this paper, I demonstrate that the...

This paper examines the importance of ex-ante heterogeneity for understanding the relationship between wealth and labor supply when markets are incomplete. An infinite horizon model is estimated where labor supply is indivisible and households are ex-ante heterogeneous in their labor disutility...

We study a two-period economy in which agents preferences take into account their relative economic position. The study builds on a decision theoretic analysis of the social emotions that underlie these relative concerns. These emotions, envy and pride, respond to social losses and gains,...

The least-skilled workforce in the United States is disproportionally employed in the provision of time-intensive services that can be thought of as market substitutes for home production activities. At the same time, skilled workers, with their high opportunity cost of time, spend a larger...

How would people spend time if confronted by permanent declines in market work? We identify preferences off exogenous cuts in legislated standard hours that raised employers' overtime costs in Japan around 1990 and Korea in the early 2000s. We estimate the probability that an individual was...

We expect a lot from the middle classes. At least three distinct arguments about the special economic role of the middle class are traditionally made. In one, new entrepreneurs armed with a capacity and a tolerance for delayed gratification emerge from the middle class and create employment and...