We estimate the "unhedged interest rate exposure" (URE) of euro area households. The URE is a welfare metric that captures the extent to which households are exposed to changes in real interest rates, and reflects the direct gains and losses in interest income flows incurred by households after...

The seminal paper by Pissarides and Weber (1989) is one of several previous studies trying to measure the size of the black economy. Pissarides and Weber compared the relationship between food expenditure and income in two groups of workers, self-employed and employees in employment, assuming...

Differences in individual wealth holdings are widely viewed as a driving force of economic inequality. However, as this finding relies on cross-section data, we may confuse older with wealthier. We propose a new method to adjust for age effects in cross-sections, which eliminates transitory...

This paper studies the structure and dynamics of consumption and consumption growth inequality. The theoretical framework is a heterogeneous agent model with stochastic labor endowments, where the group mean consumption serves as consumption externality. The main finding is that households'...

In this paper, we demonstrate how age-adjusted inequality measures can be used to evaluate whether changes in inequality over time are due to changes in the age structure. To this end, we use administrative data on earnings for every male Norwegian during 1967-2000. We find that the substantial...

Much analysis in macroeconomics empirically addresses economy-wide incentives behind consumer/investment choices by using insights from the way a single representative household would behave. Heterogeneity at the micro level can jeopardize attempts to back up the representative consumer...

We develop an analytical framework designed to solve and analyze heterogeneous-agent models that endogenously generate fat-tailed wealth distributions. We exploit the asymptotic linearity of policy functions and the analytical characterization of the Pareto exponent to augment the conventional...

Through certainty equivalent consumption (CE) measures, we show that dispersion of current earnings, expenditures, and net worth overstate welfare inequality. This is largely due to the unaccounted value of future earnings, which we call human wealth. The latter mitigates permanent-income...

We study the effect of bequests and their taxation on wealth inequality. We allow for random death and birth in a continuous-time, dynastic framework. Individuals behave optimally and accumulate wealth over their lifetime. Bequests above a tax exemption threshold are taxed according to a fixed...

What are the consequences of the preference for wealth for the accumulation of capital and for the dynamics of wealth inequality? Assuming that wealth per se is a luxury good, inequality tends to rise whenever the interest rate is larger than the economic growth rate. This induces the economy to...