This paper reconsiders the trade-off between efficiency and equality of unemployment insurance in a job search model with precautionary saving. Contrary to Cahuc and Lehmann [2000], we show that a decreasing profile of unemployment benefits is able to alleviate this trade-off when agents can...

This paper introduces a method for solving numerical dynamic stochastic optimization problems that avoids rootfinding operations. The idea is applicable to many microeconomic and macroeconomic problems, including life cycle, buffer-stock, and stochastic growth problems. Software is provided.

This paper focuses on the role of habit formation in individual preferences over consumption and saving. We closely relate to Alessie and Lusardi's (1997) model as we estimate a model which is based on their closed-form solution, where saving is expressed as a function of lagged saving and other...

This paper analyzes the conduct of monetary policy in an environment in which cyclical swings in risk appetite affect households' propensity to save. It uses a New-Keynesian model featuring external habit formation to show that taking note of precautionary saving motives justifies an...

We construct and calibrate a general equilibrium business cycle model with unemployment and precautionary saving. We compute the cost of business cycles and locate the optimum in a set of simple cyclical fiscal policies. Our economy exhibits productivity shocks, giving firms an incentive to hire...

I analyse the Household Budget Surveys prepared by the Turkish Statistical Institute (TURKSTAT) to reveal the empirical importance of precautionary saving in Turkey. The most difficult aspect of the empirical analysis is the approximation of labour income risk as a proxy variable for future...

This paper explains counterintuitive effects of a tax cut on current consumption in a small open economy where the government is endowed with an uncertain resource wealth. Depending on fiscal policy and the extraction path of the resource, different generations face different risks regarding...

We examined the evidence of precautionary saving and Constantinides (1990) type habit formation model by using the Korean Household Panel Studies, which has six years of time series observations and thousands of cross section observations. Employing the dynamic panel data estimation method, we...