with liquidity w = W/Y . Additionally, financial frictions cause consumption to decrease with this endogenously determined … consumption and the dispersion of w. Permanent earnings shocks, especially large discrete stochastic jumps, make consumption …

We develop a tractable continuous-time consumption-savings model for a liquidity-constrained agent who faces both …-temporal substitution have very different effects on savings and the dispersions of wealth and consumption … permanent and transitory income shocks under incomplete markets. We derive an explicitly-solved consumption function and show …

life-cycle consumption and savings. According to numerous studies on subjective survival beliefs, young people also … these biases into a rank-dependent utility (RDU) model over life-cycle consumption. The resulting consumption behavior is …