Households’ insurance against shocks to income and asset values (that is, household risk management) is limited, especially for poor households. We argue that a trade-off between intertemporal financing needs and insurance across states explains this basic insurance pattern. In a model with limited enforcement, we show that household risk management is increasing in household net worth and inco...

Exploiting three Italian earthquakes as quasi-experiments, we analyze the response of homeowners’ consumption to transfers targeted to finance housing reconstruction over time—which, like loans, mainly affect the liquidity of households’ wealth in the short run. We show that transfers that have no effect on consumption over a multi-year horizon, can have significant heterogeneous effects on imp...

This paper provides an alternative to the theory of rational expectations (RE). Its central idea is that the information set on which agents will choose to condition their expectations will not, in general, include all the available information. Our alternative has many of the attractive features of RE; it emerges from an explicit choice-theoretic framework; it has wide applicability; and it ca...

This paper studies the aggregate dynamics of durable and nondurable consumption under slow information diffusion (SID) due to noisy observations and learning within the permanent income framework. We show that SID can significantly improve the model’s predictions on the joint behavior of income, durable consumption, and nondurable consumption at the aggregate level. Specifically, we find that S...

What is the impact of surprise and anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations? We examine this issue using the standard stochastic real business cycle model with lump-sum taxes. Agents combine knowledge about future policy with econometric forecasts of future wages and interest rates. Dynamics under learning can have large ...

Insurance has an intertemporal aspect as insurance premia have to be paid upfront. We argue that the financing aspect of insurance is key to understanding basic insurance patterns. In a model with limited enforcement, we show that insurance is globally monotone increasing in household net worth and income, incomplete, and precautionary. These results hold in economies with income risk, durable ...

Meat-focused diets are highly debated considering their environmental and health consequences. A change in consumption patterns industrialized countries seems inevitable. To inform marketers policymakers on how to mitigate meat as a means of obtaining sustainability goals, the present study identifies consumer segments based actual purchases fresh cuts using German household scanner data for ye...

The immunohistochemical detection of bromodeoxyuridine (BrdU) was used to study the cell proliferation in the developing rat pineal gland, from the appearance of pineal primordium in the embryonic day 15 (E15) until 30 days after birth. The results showed three different proliferative phases. From E15 to E21, the pineal gland shows a phase of rapid proliferation. The second phase corresponds to...

Full consumption insurance implies that consumers are able to perfectly share risk by equalizing state by state their inter-temporal marginal rates of substitution in the presence of idiosyncratic endowment shocks. In this paper I test the implications of full consumption insurance using band spectrum regression methods. I argue that moving to the frequency domain provides a possible solution t...

This paper studies a complete-market version of the neoclassical growth model, where agents face idiosyncratic shocks to earnings. We show that if agents possess identical preferences of either the CRRA or the addilog type, then the heterogeneous-agent economy behaves as if there was a representative consumer who faces three kinds of shocks, to preferences, to technology and to labor. We calibr...