Name: DF Lunch Seminar with Pascal Noel (University of Chicago)
Start: 2026-04-23 12:30:00
End: 2026-04-23 13:45:00
Location: Weicker Building

“Liquid Wealth and Consumption Smoothing of Typical Labor Income Shocks”

With the Lunch Seminar series, the Department of Finance is bringing eminent and up-and-coming researchers from around the world to Luxembourg.

Abstract

We identify exogenous, transitory, and unpredictable shocks to labor income by combining elements from both the quasi-experimental and structural approaches in the consumption smoothing literature. We find that household consumption is highly sensitive to monthly labor income shocks. This suggests that temporary income volatility has a large welfare cost. Furthermore, consump tion is most sensitive for households with low liquidity and almost unchanged for households with high liquidity. Our findings that consumption is sensitive in a welfare-relevant setting and that there is a steep, precisely-estimated liquidity gradient help to distinguish between competing classes of consumption models.

About the speaker

Pascal Noel is the Singh Family Professor of Finance at the University of Chicago Booth School of Business. He is also a Research Associate at the National Bureau of Economic Research. His research interests include household finance, public finance, macroeconomics, real estate, labor, and behavioral economics. His research uses microeconomic administrative data and natural experiment-based empirical strategies to uncover how households make financial decisions. He examines the implications of this consumer financial behavior for structural models of household decision-making, the design of public policy, and the evolution of the macroeconomy.