Job Market Paper

Unkink MPCs

Abstract: Why do households respond little to news of additional future income but increase spending sharply when the payment arrives, even when they have sufficient liquidity to spend beforehand? Survey evidence from the United States and the United Kingdom points to perceived realization risk and incomplete psychological ownership. Receipt-only spenders explain that anticipated payments may not materialize as expected or do not yet feel like their money. In two randomized intertemporal-choice experiments holding fixed the delayed amount and access date, respondents are more willing to choose the larger, delayed funds when the funds are placed in their time-lock safe rather than guaranteed as a future payment. Across six randomized spending experiments, placing delayed funds under respondents’ control shifts spending into the anticipatory period and reduces the receipt-date MPC jump by 7 to 12 percentage points. I develop a two-account model in which perceived realization risk and incomplete psychological ownership limit current discretionary spending against anticipated extra money and generate receipt-only spending without a conventional liquidity constraint.

Working Papers

Stimulus Contract

Abstract: This paper takes a mechanism design approach to stabilization policy with the presence of unobserved household heterogeneity. We study the policy space of fiscal stimulus in managing aggregate demand. The fiscal authority sells interest-bearing digital currencies to households to be delivered at different periods. The possibility of screening depends on market incompleteness. The boundary of the aggregate demand possibilities frontier features equating mechanism-dependent marginal propensity to consume. We consider heterogeneity in discount factor, elasticity of intertemporal substitution, income risks, and wealth.

Consumption Responses to the Realization of One-Time Income Changes: A Preferred Salience Hypothesis

Abstract: This paper proposes a Preferred Salience Hypothesis, where with the realization of income changes, households are salience-seeking in the pleasure of gains, and salience-averse in the pain of losses. Under this hypothesis, households have both consumption smoothing motive and preferred salience motive, and it predicts a pattern of asymmetric consumption smoothing: households respond excessively to the realization of a one-time income gain whereas the response to the realization of a one-time income loss is muted.