Authors:

  • Raj Chetty

Excerpt

Consumption Commitments and Habit Formation, Raj Chetty, October 2014, Paper, "Many households have consumption commitments such as housing that are costly to adjust in response to fluctuations in income. Chetty and Szeidl (2007) document that more than 50% of the average U.S. household ís budget remains fixed when households face moderate income shocks such as unemployment. Olney (1999) gives historical evidence on the importance of households installment finance commitments during the Great Depression. Such consumption commitments can amplify the welfare costs of shocks..." Link