Search Results
Journal Article
Did Inflation Affect Households Differently? A Look at the Postpandemic Inflation and Wage Growth Dynamics
We analyze the heterogeneous effects of postpandemic inflation and disinflation by inspecting inflation and wage growth experienced across quintiles of household income and wage distributions. We find that after inflation peaked in June 2022, households and workers in the bottom 40 percent of the income and wage distributions have consistently experienced both higher inflation and higher wage growth when compared to the middle 40 and top 20 percent of these distributions. Comparing the cumulated growth of both variables, we observe that the bottom and middle 40 percent reach the end of 2024 ...
Journal Article
How do Consumers View Future Government Debt? A Primer on Debt-Growth Expectations
We analyze consumers’ expectations for growth in government debt before and after the COVID-19 pandemic, its breakdown by different income groups, and its relation to inflation expectations. We find that debt-growth expectations rose immediately during the pandemic recession and started to return to their prepandemic levels at the end of 2024. We also observe that consumers in the bottom 40 percent of the household-income distribution have higher debt-growth expectations than their counterparts in the middle 40 percent and top 20 percent of this distribution. A regression analysis indicates ...
Journal Article
Boomerang Kids in the Pandemic: How High-Income Families Are Their Own Safety Net
In this Economic Commentary, we use the Current Population Survey to identify and examine the influx of young adults who moved in with their parents during the COVID-19 pandemic—the so-called boomerang kids—and how being in their family home influences their labor market decisions and sensitivity to occupational risk relative to that of other young adults. We find that most boomerang kids come from high-income families that can financially support them through nonemployment spells that are, on average, longer than those of young adults not living with their parents. Young adults living ...
Journal Article
Means-Tested Transfers, Asset Limits, and Universal Basic Income
Asset limits in means-tested transfers can allow for the distribution of scarce aid to families most in need but may offer a disincentive to beneficiaries to build savings necessary to weather economic shocks. In this Economic Commentary, we examine the net worth of transfer recipients along the income distribution and review the economic literature on the matter with a discussion of universal basic income (UBI) as a policy alternative. Using the 2018 Survey of Income and Program Participation, we document that recipients have a smaller average net worth than nonrecipients at every quintile ...
Journal Article
How Insured Are Workers Against Unemployment? Unemployment Insurance and the Distribution of Liquid Wealth
In this Economic Commentary, we analyze the relationship between unemployment insurance (UI) recipiency and insurance by examining the wealth distribution of workers who have been through an unemployment spell. We focus on the net liquid wealth gap between recipients and nonrecipients of UI along the income distribution of the unemployed. Using recent data from the Survey of Income and Program Participation at the individual level, we estimate that UI recipients at the bottom half of the income distribution tend to have higher median net liquid wealth than nonrecipients, putting nonrecipients ...
Working Paper
AI-Augmented Capital-Skill Complementarity
We model artificial intelligence (AI) as a distinct capital input in a nested CES aggregate production function that extends work done by Krusell et al. (2000) and embed it in a dynamic general equilibrium economy. By bringing the model to the data, we estimate the degree to which AI either substitutes for or complements the other production inputs at the aggregate level. We find that AI is complementary to the high-skill–equipment composite and that the AI weight in production remains small. We then use the model to study how this complementarity shapes the macroeconomic and distributional ...
Working Paper
The Welfare Costs of Business Cycles Unveiled: Measuring the Extent of Stabilization Policies
How can we measure the welfare benefit of ongoing stabilization policies? We develop a methodology to calculate the welfare cost of business cycles taking into account that observed consumption is partially smoothed. We propose a decomposition that disentangles consumption in a mix of laissez-faire (absent policies) and riskless components. With a novel identification strategy, we estimate the span of stabilization power. Our results show that the welfare cost of total fluctuations is 11 percent of lifetime consumption, of which 82 percent is smoothed by the status quo policies, yielding a ...
Working Paper
The Welfare Costs of Business Cycles Unveiled: Measuring the Extent of Stabilization Policies
How can we measure the welfare benefit of ongoing stabilization policies? We develop a methodology to calculate the welfare cost of business cycles taking into account that observed consumption is partially smoothed. We propose a decomposition that disentangles consumption in a mix of laissez-faire (absent policies) and riskless components. With a novel identification strategy, we estimate the span of stabilization power. In our preferred specification, we find that the welfare cost of total fluctuations is 11 percent of lifetime consumption, of which 82 percent is smoothed by the status quo ...
Working Paper
The Welfare Costs of Business Cycles Unveiled: Measuring the Extent of Stabilization Policies
How can we measure the welfare benefit of ongoing stabilization? We develop a methodology to calculate the welfare cost of business cycles taking into account that observed consumption is partially smoothed. We propose a decomposition that disentangles consumption in a mix of laissez-faire (absent policies) and riskless components. With a novel identification strategy, we estimate the span of stabilization power. Our results show that the welfare cost of total fluctuations is 5.81 percent of lifetime consumption, in which 80 percent is smoothed by the status quo, yielding a residual 1.05 ...
Working Paper
The Macroeconomic Effects of Universal Basic Income Programs
What are the consequences of a nationwide reform of a transfer system based on means-testing toward one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current US income security system with a universal basic income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of the labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the US ...