This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile (and possibly uncertain) income paths, hold a risk-free asset, and face a borrowing constraint. I first show that the equilibrium capital stock in an economy without uncertainty,...

This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile (and possibly uncertain) income paths, hold a risk-free asset, and face a liquidity constraint. I first show that the equilibrium capital stock in an economy without uncertainty,...

This paper constructs a quantitative general equilibrium model with both lifecycle and dynastic features along with uninsurable labor income to assess differences in wealth and intergenerational transfers across countries. The model features both 'pure' and 'impure' forms of altruism and...

Two key components of the recent U.S. health reform are a new regulation of the individual health insurance market and an increase in income redistribution in the economy. Which component contributes more to the welfare outcome of the reform? We address this question by constructing a general...

This paper studies the determinants of inequality in an infnitehorizon general equilibrium model. Missing capital markets decreases motivations for capital accumulation among the poor, while uncertainty about future income leads to precautionary savings. The different returns to saving faced by...

This paper formally compares the fit of various versions of the incomplete markets model with aggregate uncertainty, relying on a simple Bayesian empirical framework. The models differ in the degree of households' heterogeneity, with a focus on the role of preferences. For every specification,...

This paper considers the macroeconomic implications of a set of empirical studies finding a high degree of dispersion in preference heterogeneity. It develops a model with both uninsurable idiosyncratic income risk and risk aversion heterogeneity to quantify their effects on wealth inequality....

This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an application to margin constraints and found to match real world...

Dynamic stochastic general equilibrium models with ex-post heterogeneity due to idiosyncratic risk have to be solved numerically. This is a nontrivial task as the cross-sectional distribution of endogenous variables becomes an element of the state space due to aggregate risk. Existing global...

This paper studies the optimal determination of bankruptcy exemptions for risk averse borrowers who use unsecured contracts but have the possibility of defaulting. I show that, in a large class of economies, knowledge of four variables is sufficient to determine whether a bankruptcy exemption...