Quantitative Macroeconomics with Heterogeneous Households

56 Pages Posted: 5 Mar 2009 Last revised: 9 Nov 2022

See all articles by Jonathan Heathcote

Jonathan Heathcote

Minneapolis Fed

Kjetil Storesletten

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)

Giovanni L. Violante

New York University (NYU) - Department of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: March 2009

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

Heathcote, Jonathan and Storesletten, Kjetil and Violante, Giovanni L., Quantitative Macroeconomics with Heterogeneous Households (March 2009). NBER Working Paper No. w14768, Available at SSRN: https://ssrn.com/abstract=1352948

Jonathan Heathcote (Contact Author)

Minneapolis Fed ( email )

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Kjetil Storesletten

University of Oslo - Department of Economics ( email )

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Norway
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Giovanni L. Violante

New York University (NYU) - Department of Economics ( email )

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New York, NY 10011
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom