Essays in macroeconomics with household heterogeneity

This dissertation is a collection of three essays, every one of which focuses on household heterogeneity in income, consumption, or wealth and the relation between this heterogeneity and macroeconomic shocks and policies. The second chapter investigates how household consumption and saving choices react to unexpected shocks in their capacity to borrow. The chapter focuses on consumption insurance coefficients, which measure to what extent consumption streams can be insulated from fluctuations in income, and compares them over time and between households with different asset positions. The third and fourth chapters enter the field of environmental economics. Chapter three studies welfare-maximizing carbon taxation in a model where households differ with respect to income, consumption, and wealth. These differences arise ex-post, as households face uninsurable idiosyncratic shocks. Hence, a key part of the chapter is to investigate the link between the carbon tax and the uncertainty surrounding these shocks. Chapter four analyses empirically the shape of Environmental Engel Curves: the relation between households’ income and their expenditure on carbon-intensive goods. The contribution of this chapter is the construction of a novel panel dataset that allows to control for time-invariant household characteristics.