The life-cycle consumption and permanent income hypotheses predict that if workers face greater likelihood of unemployment in the future that lowers expected future income, they will save more today. In this paper, we test this hypothesis by looking at the expenditure response of workers to the...

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...

I show that countercyclical earnings dynamics can have quantitatively important effects on saving and portfolio choice decisions over the life cycle. During expansions (recessions) when expected future earnings growth is high (low), households save less (more) and also invest a higher (lower)...

What is the effect of the optimal information acquisition at date t+1 regarding the uncertainty at date t+2 on the saving behavior date t? This paper explores how agents choose the timing of uncertainty resolution and its effect on ex ante consumption-saving decisions. Under rational...