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Quantitative Macroeconomics with Heterogeneous Households

Author

Listed:
  • Jonathan Heathcote
  • Kjetil Storesletten
  • Giovanni L. Violante

    (CEPR and the Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota 55401
    CEPR and the Department of Economics, University of Oslo, Oslo NO-0317, Norway
    CEPR, NBER, and the Department of Economics, New York University, New York, NY 10003)

Abstract

Macroeconomics is evolving from the study of aggregate dynamics to the study of the dynamics of the entire equilibrium distribution of allocations across individual economic actors. This article reviews the quantitative macroeconomic literature that focuses on household heterogeneity, with a special emphasis on the “standard” incomplete markets model. We organize the vast literature according to three themes that are central to understanding how inequality matters for macroeconomics. First, what are the most important sources of individual risk and cross-sectional heterogeneity? Second, what are individuals’ key channels of insurance? Third, how does idiosyncratic risk interact with aggregate risk?

Suggested Citation

  • Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2009. "Quantitative Macroeconomics with Heterogeneous Households," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 319-354, May.
    • Handle: RePEc:anr:reveco:v:1:y:2009:p:319-354
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.economics.050708.142922
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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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