This paper investigates why high income households in the United States save on average more than low income households in cross-section data. The three explanations considered are (1) age differences across households, (2) temporary earnings shocks, and (3) the structure of transfer payments....

Using data from the Federal Reserve Board's two most recent Surveys of Consumer Finances, this article provides a detailed picture of changes in the financial condition of U.S. families between 1995 and 1998. The financial situation of families changed notably in the three-year period. While...

The profession has been longing for closed-form solutions to consumption functions under uncertainty and borrowing constraints. This paper proposes an analytical approach to solving buffer-stock saving models with both idiosyncratic and aggregate uncertainties. It is shown analytically that an...

We consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources. We provide a simple characterization of the efficient allocation in cases in which the rate of return on storage is sufficiently high or, alternatively, in...

Data from the Federal Reserve Board's Survey of Consumer Finances show a striking pattern of growth in family income and net worth between 1998 and 2001. Inflation-adjusted incomes of families rose broadly, although growth was fastest among the group of families whose income was higher than the...