Consumption heterogeneity in macroeconomics and public finance

This thesis consists of three chapters on households' consumption. In the first chapter we study the canonical consumption-savings income-fluctuations problem with incomplete markets and show theoretically how to recover households' preferences and beliefs from their consumption and savings decisions. The main innovation is to show how to use the transitory component of income as an instrument that shifts current consumption without changing beliefs about future stochastic changes in consumption. As such, the transitory component of income, affects consumption growth through an intertemporal smoothing motive with no immediate effect on precautionary savings. With the precautionary motive neutralized, comparing changes in consumption and savings in response to temporary shocks allows us to identify the curvature of marginal utility: when savings respond more than consumption to transitory changes in income, the relative prudence is higher.

Name thesis:degree_name

Doctoral

Department dc:contributor.department

Massachusetts Institute of Technology. Department of Economics

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2019

Author dc:creator

• Olivi, Alan(Alan Kevin)

Advisor dc:contributor.advisor

• Iván Werning and Robert Townsend.

• Economics.

Statement dc:rights

• MIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

https://hdl.handle.net/1721.1/122112

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/122112