The economics of consumption: Theory and Evidence/ by Tullio Japplelli, Luigi Pistaferri

Cover; The Economics of Consumption; Copyright; Dedication; Contents; Preface; Acknowledgments; 1. Intertemporal choice under certainty; 1.1. The two-​period model; 1.2. The multi-​period model; 1.3. The life-​cycle model; 1.4 Demographic variables; 1.5. Intertemporal choice in continuous time; 1.6. Infinite time horizon; 1.7. Aggregate implications of the life-​cycle model; 2. The age profile of consumption and wealth; 2.1. Consumption growth and the interest rate; 2.2. Saving and the interest rate; 2.3. The age profiles of income, consumption, and wealth 2.4. Estimating the age profile of consumption2.5. Demographic variables and equivalence scales; 2.6. The age profile of wealth; 2.7. The measurement of savings and wealth; 3. Complete markets; 3.1. A model with two states and two periods; 3.2. The multi-​period model; 3.3. Tests of complete markets; 3.4. Implications for consumption inequality and mobility; 3.5. The aggregation problem; 3.6. Why don't we observe complete markets?; 4. The certainty equivalence model; 4.1. Intertemporal choice under uncertainty; 4.2. The Euler equation with quadratic utility 4.3. The consumption function and income innovations4.4. Income shocks and the marginal propensity to consume; 4.5. Saving for a rainy day; 4.6. Consumption inequality; 5. Liquidity constraints; 5.1. A two-​period model; 5.2. The sensitivity of consumption to expected income changes; 5.3. The timing of income and consumption; 5.4. The natural borrowing constraint; 5.5. The Euler equation with liquidity constraints; 6. The precautionary saving model; 6.1. Incomplete markets and precautionary saving; 6.2. A numerical example; 6.3. The Euler equation with precautionary saving 6.4. An explicit solution for precautionary saving6.5. The marginal propensity to consume with precautionary saving; Appendix: Risk aversion and prudence; 7. The buffer stock model; 7.1. Expected liquidity constraints; 7.2. Precautionary saving with liquidity constraints; 7.3. The buffer stock model; 7.4. The concavity of the consumption function; Appendix: Solving consumption stochastic dynamic programming problems; 8. The response of consumption to anticipated changes in income; 8.1. The excess sensitivity test; 8.2. Implementing and interpreting the excess sensitivity test. 8.3. Tests for liquidity constraints8.4. Direct evidence from credit markets; 8.5. Asymmetric response to income increases and declines; 8.6. Episodes of anticipated income increases; 8.7. Anticipated income declines and the retirement consumption puzzle; Appendix: Econometric problems in estimating the Euler equation; Measurement error; Short panels; 9. The response of consumption to unanticipated changes in income; 9.1. The quasi-experimental approach; 9.2. Covariance restrictions; 9.3. Consumption mobility; 9.4. Consumption inequality; 9.5. Subjective expectations.

In The Economics of Consumption, Tullio Jappelli and Luigi Pistaferri provide a comprehensive examination of the most important developments in the field of consumption decisions and evaluate economic models against empirical evidence.