Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
  1. Home
  2. Search

Refine search

Refine search

Access:
Content type:
Publication date:
Apply   From and To filters
Subject: Show more
Journals Show more
Publishers: Show more
Societies Show more
Series: Show more
Collections: Show more

Actions for selected content:

Select all | Deselect all
  • View selected items
  • Export citations
  • Download PDF (zip)
  • Save to Kindle
  • Save to Dropbox
  • Save to Google Drive

Save Search

You can save your searches here and later view and run them again in "My saved searches".

Please provide a title, maximum of 40 characters.
Cancel
×

1 results

  • 3 - Household Consumption and Saving

  • Peter Skott, University of Massachusetts, Amherst
  • Book:
    Structuralist and Behavioral Macroeconomics
    Published online:
    10 November 2023
    Print publication:
    21 September 2023, pp 41-69

  • Summary

    Behavioral economics has demonstrated deviations from the perfect optimization depicted in standard models. Some deviations are trivial and irrelevant for macroeconomics. Others, however, are systematic and affect aggregate outcomes, including aggregate household saving. Pervasive uncertainty and the influence of ‘nudging’ on household retirement saving cast doubt on models of saving that are based on strict optimization and rational expectations. Behavioral evidence also points to possible reasons for under-saving. The well-documented existence of ‘present bias’, not surprisingly, can reduce saving, and simple models demonstrate that peer effects on consumption can also have this effect. Macroeconomic relations should indeed reflect microeconomic behavior and macroeconomics must be ‘behavioral’. But the specification of consumption in contemporary macroeconomic models is based on misleading assumptions about microeconomic behavior. The modeling of aggregate consumption must build on behavioral evidence, address aggregation issues, and consider structural constraints, including credit rationing.