The textbook permanent-income hypothesis predicts that the level of consumption is proportional to the level of permanent income, while, in the data, the elasticity of consumption to permanent income appears to be far below one. In this paper, I provide evidence for a novel theory for this consumption under-response to permanent income based on consumption commitments -- hard-to-adjust consumption choices that resemble long-term commitments. Empirically, I document four main new facts that support the theory: (a) the consumption elasticity to permanent income is larger for younger households, (b) it depends on past income trajectories, and (c) it becomes larger after households adjust their commitments; furthermore, I show that (d) those households that have "under-responded" to their income growth skew spending away from hard-to-adjust goods (notably shelter). These facts are evidence in favor of household "lock-in" to past consumption choices. Quantitatively, I show that consumption commitments are necessary for life-cycle models to account for all the documented facts and explore implications for the aggregate distribution of income, consumption, and wealth.

We study the long-term effects of maternal unemployment on children's labor market outcomes using data from the NLSY79 and NLSY79-CYA. Children exposed to more maternal unemployment have lower wages and employment probabilities in adulthood. Importantly, these effects persist even after controlling for family income, indicating that increased parental time availability does not offset the scarring effects of unemployment. We find that the negative effects are concentrated among older children, suggesting that exposure to maternal unemployment during late schooling and early career years is particularly consequential. Specifically, we show that those children are more likely to drop out of high school, less likely to graduate from college, and more likely to select lower-return, lower-risk occupations in adulthood.

We propose a model to study an inflation-targeting regime under a high government debt burden. We assume that an altruistic policymaker chooses debt issuance, inflation, and public expenditure, while private agents dislike inflation and finance the government. We show that equilibrium inflation depends on debt level: (1) on-target when debt is low; (2) above the target when debt is high; (3) either above or on-target in between, a zone that we named fiscal fragility. Equilibrium inflation also depends on the target level: a higher target may improve welfare by preventing fiscal fragility and reducing debt-rollover costs.

We estimate cyclicality in labor's user cost allowing for cyclical fluctuations in the quality of worker-firm matches and wages that are smoothed within employment matches. To do so, we exploit a match's long-run wage to control for its quality. Using NLSY data for 1980 to 2019, we identify three channels by which recessions affect user cost: It lowers the new-hire wage; it lowers wages going forward in the match; but it also results in higher subsequent separations. All totaled, we find that labor's user cost is highly procyclical, increasing by more than 4% for a 1 pp decline in unemployment.