Franco Modigliani was born in 1918 in Italy. He earned his doctorate in economics at the New School of Social Research. He is a professor of economics at Massachusetts Institute of Technology and was the president of the American Economic Association in 1976. He received the Nobel Prize in Economics in 1985 for the following two contributions: "his analysis of the behavior of household savers" and the Modigliani-Miller Theorem in corporate finance. His first contribution was introduced in the 1950's as the "life cycle" model of consumption, in which he claimed that most people want to have a stable level of consumption throughout their lifetime and therefore, income expectatations play a big role in consumption behavior. Because income tends to follow a bell curve shape throughout one's lifetime,(low in the beginning, high in the middle years, and low again upon retirement), young people will be the largest borrowers, middle-aged people will be the largest savers, and the elderly will run down their savings. In regard to his second contribution, the Modigliani-Miller Theorem, many people consider this theorem to be one of the biggest contributions to the field of corporate finance. According to this theorem, under certain assumptions, the value of a firm is independent of its ratio of debt-to-equity. He is a Keynesian economist.

Works by Franco Modigliani:

Corporate Income Taxes and the Cost of Capital, AER

The Cost of Capital, Corporation Finance, and the Theory of Investment, AER

Fluctuations in Saving-Income Ratio: A Problem in Economic Forecasting, Studies in Income and Wealth

The Life Cycle Hypothesis of Saving: Aggregate Implications and Tests, AER

The Predictability of Social Events, JPE

Utility Analysis and the Consumption Function, Post-Keynesian Economics