Wealth, Information Acquisition, and Optimal Consumption-saving Behavior

Category: Money and Macro Brown Bag Seminar
When: 07 February 2019
, 12:00
 - 13:00
Where: Boston (HoF 2.45)
Speaker: Penghui Yin (GSEFM , Goethe University Frankfurt)

How would heterogenous households acquire information to make consumption decisions? To answer this question, we extend the three-period consumption-saving model in Epstein (1980) by allowing rational inattentive agents to endogenously decide their information acquisition. In such a model, we solve for both agents' optimal consumption choice problem and information acquisition problem. We find that wealthier households pay less attention to learn the capital return, and the saving demand in the initial period is decreasing over the amount of attention. These two findings together can help to explain the puzzling empirical fact that wealthier households save at a higher rate.