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Carroll and Kimball (1996) show that the consumption function for an agent with time-separable, isoelastic preferences is concave in the presence of income uncertainty. In this paper I show that concavity breaks down if we abandon time-separability. Namely, if an agent maximizing an isoelastic...
Persistent link: https://www.econbiz.de/10010412680
We demonstrate that interpersonal comparisons lead to "keeping up with the Joneses"-behavior. Using annual household data from the German Socio-Economic Panel, we estimate the causal effect of changes in reference consumption, defined as the consumption level of all households who are perceived...
Persistent link: https://www.econbiz.de/10010190171
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...
Persistent link: https://www.econbiz.de/10010190271
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...
Persistent link: https://www.econbiz.de/10010487750
consumption in any present or future state of nature (good or bad). As a result the degree of loss aversion does not directly … present value of its endowment income, then the household cannot avoid experiencing a relative loss in consumption, either now … or in the future. As a result, loss aversion directly affects consumption and risky investment. Reference levels play a …
Persistent link: https://www.econbiz.de/10011483180
reference level and the degree of loss aversion. Among others we find that the household increases its exposure to risky assets …
Persistent link: https://www.econbiz.de/10011938681
We study whether households can distinguish persistent from transitory income shocks, and the implications for consumption-saving behavior. We construct a novel consumption-saving model where the household must infer the persistent component of its income process from actual income realizations...
Persistent link: https://www.econbiz.de/10012928282
uncertainty about future income triggers saving because of loss aversion. We extend their theoretical analysis to also consider … the internal margin, i.e., the strength, of loss aversion, and empirically study the relation between income risk …, experimentally elicited loss aversion and precautionary savings. We do so using a sample of 640 individuals from the low …
Persistent link: https://www.econbiz.de/10012438025
triggers an increase in saving because of loss aversion. Guided by the theoretical model of Koszegi and Rabin (2009), we first … extend their theoretical analysis to also consider the internal margin, i.e., the strength, of loss aversion, and then … empirically study the relation between income risk, experimentally elicited loss aversion, and precautionary savings. We do so …
Persistent link: https://www.econbiz.de/10014312199
The revolving credit available to consumers changes substantially over the business cycle, life cycle, and for individuals. We show that debt changes at the same time as credit, so credit utilization is remarkably stable. From ages 20-40, for example, credit card limits grow by more than 700...
Persistent link: https://www.econbiz.de/10011770619