Essays on household saving behavior and fiscal policy

This dissertation consists of three essays on household saving behavior and fiscal policy.;The first essay uses state-industry variation to identify precautionary saving behavior at the household level. Households in more volatile states save more, consistent with the theory. Precautionary motives are significant only for younger households. Volatile labor income makes households less likely to own homes, but more likely to participate in the stock market.;The second essay uses variation in state budget rules to identify Keynesian fiscal policy multipliers. In a fiscal crisis, states with strict balanced-budget rules engage in larger fiscal recisions; this variation is plausibly exogenous and implies a multiplier of 1.6--1.8, which is significantly larger than multipliers estimated from aggregate time series. It costs roughly ;The third essay studies the response of household portfolio behavior to capital gains taxation. The tax induces the well-known "lock-in" effect, inhibiting roughly one-fourth of portfolio rebalancing at the household level. The deadweight burden of the lock-in effect is estimated to be 10--25% of the revenue collected, comparable to the range of estimates for the deadweight burden of labor income taxes. More rational households are better at adjusting their behavior to minimize their welfare losses, while less rational households actually experience a net welfare gain from lock-in because it reduces their over-trading.