Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to...

This paper presents a framework for the quantitative analysis of individual income dynamics, mobility and welfare, with ex-ante identical individuals facing a stochastic income process and market incompleteness implying that they are unable to insure against persistent shocks to income. We show...

This paper presents a framework for the quantitative analysis of individual income dynamics, mobility and welfare, with ex-ante identical individuals facing a stochastic income process and market incompleteness implying that they are unable to insure against persistent shocks to income. We show...

Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to...

The desirability, efficacy, and cost-effectiveness of government welfare policies depend crucially on the income risk that households face and the actions that they can take to reduce consumption fluctuations, for instance by adjusting their saving and labor supply. Shocks to labour earnings are...

Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to...