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Journal Article
Compression in the Wage Distribution During the Post-Covid-19 Labor Market
The COVID-19 pandemic caused changes for business across all industries, though the effects were unequal. As lockdown restrictions aimed at mitigating the spread of COVID-19 were relaxed, nominal wage growth rose sharply in leisure and hospitality and in trade and transportation, the two industries with the highest concentration of low-wage workers. In fact, wage growth was most pronounced for workers in the bottom 50 percent of the wage distribution who changed jobs into one of these industries.
Working Paper
Unequal Climate Policy in an Unequal World
We study climate policy in an economy with heterogeneous households, two types of goods (clean and dirty), and a climate externality from the dirty good. Using household expenditure and emissions data, we document that low-income households have higher emissions per dollar spent than high-income households, making a carbon tax regressive. We build a model that captures this fact and study climate policies that are neutral with respect to the income distribution. A central feature of these policies is that resource transfers across consumers are ruled out. We show that the constrained optimal ...
Journal Article
Evaluating Homeownership as the Solution to Wealth Inequality
Homeownership presents an opportunity to accumulate wealth, making it an appealing vehicle for reducing wealth inequality. In this Commentary, we explore the investment side of homeownership. The opportunity for leveraged returns can lead to wealth gains among lower-income households; however, we note that homeownership for low-income homeowners carries three types of risk that are higher for them than for high-income homeowners: location, timing, and liquidity. Thus, policies that incentivize purchasing homes to reduce wealth inequality or close racial wealth gaps should be adopted only ...
Working Paper
The Piketty Transition
We study the effects on inequality of a "Piketty transition" to zero growth. In a model with a worker-capitalist dichotomy, we show first that the relationship between inequality (measured as a ratio of incomes for the two types) and growth is complicated; zero growth can raise or lower inequality, depending on parameters. Extending our model to include idiosyncratic wage risk we show that growth has quantitatively negligible effects on inequality, and the effect is negative. Finally, following Piketty?s thought experiment, we study how the transition might occur without declining returns; ...
Working Paper
On the Distributional Effects of International Tariffs
We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the US and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor, and capital income, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth households, while only wealthy ...
Journal Article
Time-consistent rules in monetary and fiscal policy
The intended effects of a government policy can be distorted by the public?s expectations about how strictly it will be enforced. If households and businesses cannot be certain that a policy will remain unchanged over its scheduled tenure, they will adjust their response to it to reflect this uncertainty. One way of mitigating the uncertainty is to add rules to new policies when they are enacted that would make altering the policies very difficult in the future.
Journal Article
Income Inequality Matters, but Mobility Is Just as Important
Concerns about rising income inequality are based on comparing income distributions over time. It is important to remember that such distributions are snapshots of a single year, and that the same households do not necessarily appear year after year in the same quintile of the distribution. Paying attention to mobility, as well as inequality, gives us a richer picture of the income possibilities for households over time. We document changes in a measure of income mobility over the past 40 years, a period in which income inequality has increased. We find a modest level of movement through the ...
Journal Article
The Racial Wealth Gap and Access to Opportunity Neighborhoods
Some Black households live in neighborhoods with lower incomes, as well as higher unemployment rates and lower educational attainment, than their own incomes might suggest, and this may impede their economic mobility. We investigate reasons for the neighborhood sorting patterns we observe and find that differences in financial factors such as income, wealth, or housing costs between Black and white households do not explain racial distributions across neighborhoods. Our findings suggest other factors are at work, including discrimination in the housing market, ongoing racial hostility, or ...
Journal Article
An Update on Wealth Mobility
We measure wealth mobility in the United States. Using the latest wave of the Panel Study of Income Dynamics (PSID), we update Carroll and Hoffman (2017), who document a decreasing trend in wealth mobility over the past 30 years. We confirm another of their findings that large upward movements in wealth are associated with families’ owning businesses and real estate other than a primary residence. Finally, we turn to the much larger Survey of Income and Program Participation (SIPP) data and document that these “large mover” households are evident even over three-year periods.
Working Paper
A note on sunspots with heterogeneous agents
This paper studies sunspot fluctuations in a model with heterogeneous households. We find that wealth inequality reduces the degree of increasing returns needed to produce indeterminacy, while wage inequality increases it. When the model is calibrated to match the joint distribution of hours, income, and wealth, the required degree of increasing returns to scale is still much too high to be supported empirically (although smaller than similar homogeneous agent economies). We also find that the model robustly predicts only one sunspot, despite having 1,262 predetermined state variables.