We reassess the empirical effects of income and employment on self-reported well-being. Our analysis makes use of a two-step estimation procedure that allows applying instrumental variable regressions with ordinal observable data. As suggested by the theory of incomplete markets, we...

Various studies have interpreted a positive correlation between income risk and wealth as evidence for large precautionary savings. However, the high estimates emerged from pooling non-entrepreneurs and entrepreneurs without controlling for heterogeneity. This paper provides evidence for Germany...

This paper utilizes a unique micro data set on consumer durables to study the effect of consumption tax reforms on the time path of consumption. The dataset reports the monthly sales of individual products and their consumer prices in 22 European countries, which enacted numerous consumption tax...

In the current debate on the reasons and implications of the Greek and Irish euro crisis, the intra-European current account imbalances have gained rising attention. Whereas Greece and Ireland struggle for austerity in private and public spending, Germany is urged to reduce its current account...

I develop a heterogenous agent life-cycle model that examines the effects of the US personal bankruptcy law on bankruptcy filings and welfare. In addition to facing uncertainty over their labor income, agents also face wealth shocks that stem from unexpected changes in family composition or from...

In this study, the relation between consumer credit and real economic activity during the Great Moderation is studied in a dynamic stochastic general equilibrium model. Our model economy is populated by two different household types. Investors, who hold the economy's capital stock, own the firms...

The nine largest countries in the Euro area have surprisingly different degrees of wealth inequality. At the same time, there is a strong negative correlation between wealth inequality and homeownership rates across countries. To account for this fact, we first analyze decompositions of the Gini...

Bankruptcy legislation has important welfare effects on the aggregate economy through effects on prices of and access to credit. Policy makers face a trade-off between insuring individuals against adverse shocks and providing incentives to repay debt. While the U.S. regime has a strong insurance...

In the light of new theoretical and empirical work on the Permanent Income Hypothesis we tackle earlier findings for German data, which reject its validity given a large fraction of liquidity constrained consumers. Starting from a standard short run approach we do not find evidence for excess...

The Spanish economy is currently plagued by a deep recession with very high unemployment. We ask how much of the unemployment increase in Spain can be traced back to the debt deleveraging needs of Spanish households. We use provincial household debt and sectoral unemployment data and follow Mian...