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...

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...

Much of the literature on time inconsistency has studied the external commitment devices that individuals use to address their self-control problems: tying oneself to the mast, staying away from temptation, holding illiquid assets, or "asking controls" from others. This paper, by contrast,...

In 1997 Chancellor Kohl proposed a major pension reform and pushed the law through Parliament explaining that the German PAYG system had become unsustainable. One limitation of the new law---one that is crucial for our identification strategy---is that it left the generous pension entitlements...

This paper analyzes the self-identification process and its role in motivation. We build a model of self-confidence where people have imperfect knowledge about their ability, which in most tasks is a complement to effort in determining performance. Higher self-confidence thus enhances...

The main purpose of this paper is to study the economic behavior of migrants under uncertainty . We show , in particular, that the impact of the probability of return remains ambiguous regarding both the savings and labor participation of the migrants , this theoritical finding seems to...

Because they ignore the household-level and macroeconomic adjustments associated with longevity improvements, the actuarial projections of the Social Security Administration overestimate the Social Security crisis. Using a general-equilibrium model with heterogeneous agents and incomplete...

In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labor supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings...

Household production is an important non-market activity and the empirical literature has developed different methods towards valuing household production without, however, providing a rigorous theoretical foundation for the various approaches. We follow the literature spawned by Becker (1965)...