This thesis contains four independent essays on the macroeconomic implications of heterogeneity in households’ consumption-savings behaviour. Chapters 1 and 2 examine the aggregate effects of rising labour income inequality. Chapter 1 shows that the rise in income inequality since the 1980s can jointly explain four prominent macro-finance trends: the rise in the wealth-to-income ratio and the share of risky assets in household portfolios, the decline in the risk-free interest rate, and the stability of the return to capital. Using an incomplete markets model with endogenous portfolio choice, I show that higher inequality increases asset demand, in particular for risky assets, reallocates capital toward productive firms, and raises aggregate productivity. Chapter 2, co-authored with Jan Mazza, studies the open-economy implications of income inequality. We document that higher income inequality is associated with higher current account balances, especially in advanced economies. A two-country heterogeneous-agent model with non-homothetic preferences rationalizes this finding, showing that higher inequality raises savings demand, leading to capital flows from unequal to equal countries. We use the model to analyze the effects of redistribution, financial liberalization, and cross-border financial integration. Chapters 3 and 4 focus on household consumption responses to transitory income changes and their policy implications. Chapter 3 proposes a consumption model with mental accounting that addresses several empirical puzzles around marginal propensities to consume. A calibrated life-cycle model shows that mental accounting dampens the effectiveness of redistributive fiscal policy. Chapter 4, co-authored with Michael Boutros, studies “coholding” households – those who simultaneously borrow on credit cards and hold cash. We show that gross positions in liquid assets and debt significantly influence consumption, saving, and debt repayment responses to income shocks. We develop a structural model that replicates these behaviours and assess their implications for fiscal and monetary policy.

-- Chapter 1 Income Inequality and the Rise of Risky Capital -- Chapter 2 Domestic Inequality and Global Imbalances -- Chapter 3 Marginal Propensities to Consume with Mental Accounting -- Chapter 4 The Macroeconomic Implications of Coholding -- Appendix A Appendix to Chapter 1 -- Appendix B Appendix to Chapter 2 -- Appendix D Appendix to Chapter 4

Examining Board: Prof. Edouard Challe (Paris School of Economics; Former European University Institute, Supervisor); Prof. Russel Cooper (European University Institute); Prof. Miguel Ampudia (European Central Bank); Prof. Martin Blomhoff Holm (University of Oslo)

The author was Co-winner of Vilfredo Pareto Prize the Best Doctoral Thesis in Economics, 2025.

Defence date: 02 June 2025