In booms, households substitute luxuries for necessities, e.g., food away from home for food at home. Ignoring this cyclical pattern of composition changes in the consumption basket makes the labor-market wedge -- a measure of inefficiency that reflects the gap between the marginal rate of...

In booms, households substitute luxuries for necessities, e.g., food away from home for food at home. This cyclical pattern of composition changes in the consumption basket has the potential to reduce the volatility of measures of the labor-market wedge, the gap between the marginal rate of...

Based on administrative data from Statistics Norway, we find economically significant shifts in households' financial portfolios around structural breaks in income volatility. When the standard deviation of labor-income growth doubles, the share of risky assets decreases by 4 percentage points....

The standard theory of household portfolio choice is hard to reconcile with the following facts. (i) Despite a high rate of returns the average household holds a low share of risky assets (equity premium puzzle). (ii) The share of risky assets increases in age. (iii) The share of risky assets is...