Consumption Choices and Earnings Expectations: Empirical Evidence and Structural Estimation

Arbeitspapier

In this paper, we document that households' consumption expenditures depend on their expected earnings – even after controlling for realized earnings and wealth. To explain this evidence, we develop and structurally estimate a standard-incomplete markets model in which rational households possess private advance information on their future earnings. We find that households are better informed about their future earnings than an econometrician and that individual expectations are more relevant for the consumption choices of households in the left tail of the wealth distribution. Furthermore, households with advance information prefer less progressive earnings taxes.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. TI 2022-049/VI

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Incomplete Markets ; Personal Income, Wealth, and Their Distributions ; Expectations; Speculations ; Macroeconomics: Consumption; Saving; Wealth
• Thema: Private information ; household consumption ; earnings dynamics ; incomplete markets ; subjective expectations

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Stoltenberg, Christian ; Uhlendorff, Arne
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2022

Weitere Informationen

• Handle: http://hdl.handle.net/10419/263969
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ