Ph.d.-forsvar: Jeppe Druedahl: Microfunding Consumption. Uncertainty, liquidity and heterogeneity
This PhD thesis consists of four self-contained chapters on microfounding the consumption behavior of households in the presence of idiosyncratic income and credit risk, transaction costs, and preference heterogeneity.
The first chapter addresses the credit card debt puzzle by constructing a model where it can be resolved by a combination of: (a) specifying credit cards as long-term revolving debt contracts which are partly irrevocable from the lender side, and (b) shocks to the availability of new credit.
The second chapter relies on a similar specification of the mortgage contract as being both long-term and in gross debt, to improve our understanding of the life-cycle dynamics of the home ownership rate.
The third chapter estimates a non-parametric distribution of preferences using imputed consumption data from the Danish income and wealth registers, and shows that the estimated degree of heterogeneity in impatience and risk aversion is far from enough to explain the observed wealth inequality.
The final and fourth chapter shows that adding cyclical variation in idiosyncratic income risk, and in the tightness of the collateral constraint, strongly amplify the model-implied cyclical drop in the share of households who adjust their durable stock during recessions in a standard buffer-stock consumption model extended with a durable good, where trading is subject to transaction costs.
All the four chapters rely on state-of-the-art computational methods to efficiently solve the proposed models, which due to the presence of non-convexities typically are non-standard.