According to the expectations channel, a fiscal consolidation may give rise to less contractionary, or even expansionary effects on consumption, despite a decline in current disposable income. Intuitively, people may accumulate a stock of savings in anticipation of the consolidation and may...

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both...

We report on a series of economic decision-making experiments exploring how individuals make lifecycle consumption and saving plans when they face different income profiles. We find that for every income profile we consider, subjects on average over-consume in the early periods of life and...