Overview

Consumption decisions are crucial determinants of business cycles and growth. Knowledge of how consumers respond to the economic environment and how they react to the risks that they encounter during the life-cycle is therefore important for evaluating stabilization policies and the effectiveness of fiscal packages implemented in response to economic downturns or financial crises. 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. The first part of the book provides the basic ingredients of economic models of consumption decisions. The central part reviews the empirical literature on the effect of income and wealth changes on consumption and on the relevance of precautionary saving and credit market imperfections. The last chapters extend the basic framework to such important areas as bequests, leisure, lifetime uncertainty, and financial sophistication. Jappelli and Pistaferri shed light on important issues, including how consumption responds to changes in economic resources, how economic circumstances and consumers' characteristics influence behavior, and whether consumption inequality depends on income shocks and their persistence.

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9780199383160

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Reviews

Written by two world leaders in consumption research this book brings together the recent evidence and theory in a comprehensive and compelling volume. Highlighting the key role of life-cycle behavior, saving and uncertainty, it is a must read for any student or researcher interested in understanding consumption. - Richard Blundell, University College London and Institute for Fiscal Studies The Economics of Consumption fills a massive gap in the literature on applied consumption theory. It covers the important empirical and theoretical advances that have taken place over the last 25 years, which, until now, have only been accessible through academic journals. This makes the book a tremendously valuable resource for students and researchers, bringing together in one place the knowledge that is necessary to appreciate the close connection between theory and data that is the hallmark of modern economics - Greg Kaplan, Professor of Economics, University of Chicago This excellent overview of the leading theories of consumption builds systematically from simpler to richer models to develop intuition for their inner workings, and it thoughtfully evaluates their usefulness for understanding behavior. It will be a valuable resource to students, teachers, and researchers alike. - Lee Lockwood, Assistant Professor of Economics at the University of Virginia

Author Information

"Tullio Jappelli is Professor of Economics and Chairman of the Department of Economics and Statistics at the University of Naples Federico II, a Research Fellow of the Center for Economics and Finance (CSEF) and of CEPR. Luigi Pistaferri is a Professor of Economics at Stanford University, a Research Fellow of NBER, CEPR, the ""Ralph Landau"" Senior Fellow at the Stanford Institute of Economics and Policy Research (SIEPR), and one of the co-editors of the American Economic Review."

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