We study the sensitivity of optimal consumption streams with respect to perturbations of the random endowment. At the leading order, the consumption adjustment does not matter: any choice that matches the budget constraint simply shifts the original utility by the marginal value of the...

In this paper, we utilise data from a German population survey to test the validity of the Ricardian equivalence theorem (RET). In 2013, 2,000 representatively chosen people were asked whether they have altered their consumption and saving behaviour in response to the significant increase in...

This paper evaluates theoretical explanations for the propensity of households to increase spending in response to the arrival of predictable, lump-sum payments, using households in the Nielsen Consumer Panel who received $25 million in Federal stimulus payments that were distributed randomly...

This paper considers a general permanent-income model in which a fraction of consumers in the economy is liquidity constrained. Consumption growth rate for these individuals is related to the growth rate of their income and the level of real interest rates. The interest-rate coefficient is...

This paper estimates and tests several versions of the consumption-based asset pricing model extended to allow for time-nonseparable preferences and/or liquidity constraint proxies, using Canadian aggregate data. It is found that a habit-persistence effect uncovered in the time-nonseparable...

This paper characterizes optimal consumption and investment policies for investors with asset return predictability, stochastic labor income and endogenously-determined retirement. We find that the ratio of total wealth-to-labor income (normalized wealth) is the primary determinant of the...

This paper studies the concavity of the consumption function of a habit-forming consumer with convex absolute risk tolerance. Habit formation is incorporated into a finite-horizon consumption-saving model of Carroll and Kimball (1996). I derive a condition under which the consumption function is...

We propose a new category of consumption goods, memorable goods, that generate a utility flow even after physical consumption. Empirically, memorable goods expenditures exhibit frequent zero monthly purchases and lumpy expenditure spikes. Memorable goods expenditures are 20% the size of...

Does it make us unhappier when we compare our current consumption with that of the Joneses or our own past achievements? This paper tries an answer without recurring on interpersonal utility comparisons. It calibrates an economy under three different assumptions, non-comparing utility, and...

We study how 3,534 beneficiaries of PROSPERA, Mexico's cash transfer program, smooth food consumption around the transfer payday, an anticipated and transitory income shock. We find that food consumption and food security do not change around the transfer payday, including for recipients with...