The distributions of consumption, income and wealth are highly dispersed, not only accross individuals but also along the lifecycle. Household data show that consumption, income and wealth inequality all increase with age. In this seminar, we will focus on macroeconomic lifecycle models that capture these salient features. Among others, we seek to investigate the following questions:
- How and to what extend do households smooth consumption over their life?
- What are the implications of increased income inequality on interest rates, capital accumulation, and wealth inequality?
- Why are marginal propensities to consume so different accross households and so high on average?
- Should tax rates be age dependent?
- How does the option to default on credit interact with lifecycle choices of households?
- How do market failures affect the educational investments of parents in their children, and which policies can address these failures?
Modality
Your tasks consist of (i) presenting an assigned paper from the scientific literature, and (ii) writing a seminar paper that summarizes and provides a critical perspective of the presented paper.
The kick-off meeting will take place on October 25 from 14:00 to 15:30. The allocation of the topics will be according to your stated preferences and will be announced during the kick-off meeting. Presentations will take place on two days in mid-December.
Prerequisites: Basic statistics, Intro to Microeconomics and Macroeconomics.
The language of this seminar is English: presentations, discussions and seminar papers will have to be carried out in English.
Topics
T1: Consumption
- Gourinchas, P.-O. and J. Parker (2002). "Consumption over the Lifecycle." Econometrica 70(1), 47-89. https://doi.org/10.1111/1468-0262.00269
- Straub, L. (2019). "Consumption, Savings, and the Distribution of Permanent Income." Working Paper. https://scholar.harvard.edu/files/straub/files/cons_ineq_rates.pdf
T2: Taxation & Fiscal Policy
- Kaplan, G. and G. Violante (2014). "A Model of the Consumption Response to Fiscal Stimulus Payments." Econometrica 82(4), 1199-1239. https://doi.org/10.3982/ECTA10528
- Weinzierl, M. (2011). "The Surprising Power of Age-Dependent Taxes." Review of Economic Studies 78(4), 1490-1518. https://doi.org/10.1093/restud/rdr001
T3: Credit & Financial Markets
- Athreya, K. (2008). "Default, insurance, and debt over the life-cycle." Journal of Monetary Economics 55(4), 752-774. https://doi.org/10.1016/j.jmoneco.2008.05.006
- Exler, F., I. Livshits, J. MacGee and M. Tertilt (2021). "Consumer Credit with Over-Optimistic Borrowers." FRB of Philadelphia Working Paper No. 21-42. http://dx.doi.org/10.21799/frbp.wp.2021.42
T4: Education
- Abbott, B., G. Gallipoli, C. Meghir and G. Violante (2019). "Education Policy and Intergenerational Transfers in Equilibrium." Journal of Political Economy 127(6), 2569-2624. https://doi.org/10.1086/702241
- Caucutt, E. and L. Lochner (2020). "Early and Late Human Capital Investments, Borrowing Constraints, and the Family." Journal of Political Economy 128(3), 1065-1147. https://doi.org/10.1086/704759