Search Results
Showing results 1 to 10 of approximately 18.
(refine search)
Working Paper
Inflation at the Household Level: Web Appendix
This appendix contains additional results on using scanner data to estimate inflation rates at the household level. There are three sections. Section 1 shows cross-sectional distributions of Fisher and Paasche inflation rates. Section 2 shows the evolution over time of measures of dispersion of Fisher and Paasche inflation rates. Section 3 shows cross-sectional distributions of two-year inflation rates measured with Fisher and Paasche indexes.
Working Paper
Enduring Relationships in an Economy with Capital and Private Information
We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to an agent and his lifetime utility entitlement. The mapping implies properties that are distinct from those in models with private information about endowments. In contrast to the latter, the value of the risk-sharing arrangement in our model always remains above the autarky value. There is no need for ...
Report
Heterogeneous Agent Trade
This paper studies the implications of household heterogeneity for trade. I develop a model where household heterogeneity is induced via incomplete markets and results in heterogeneous price elasticities. Conditional on exposure to trade, heterogeneous price elasticities imply that different households value price changes differently, and thus rich and poor households experience different gains from trade. I calibrate the model to match bilateral trade flows and micro-facts about household-level expenditure patterns and elasticities. I find gains from trade that are pro-poor and that the ...
Working Paper
The Role of Government and Private Institutions in Credit Cycles in the U.S. Mortgage Market
The distribution of combined loan-to-value ratios (CLTVs) for purchase mortgages has been remarkably stable in the U.S. over the last 25 years. But the source of high-CLTV loans changed during the housing boom of the 2000s, with private securitization replacing FHA and VA loans directly guaranteed by the government. This substitution holds within ZIP codes, properties, and borrower types. Furthermore, the two groups exhibit similar delinquency rates. These findings suggest credit expanded predominantly through the increase in asset values rather than a relaxation of CLTV constraints, which ...
Report
Optimal Progressivity with Age-Dependent Taxation
This paper studies optimal taxation of labor earnings when the degree of tax progressivity is allowed to vary with age. We analyze this question in a tractable equilibrium overlapping-generations model that incorporates a number of salient trade-offs in tax design. Tax progressivity provides insurance against ex-ante heterogeneity and earnings uncertainty that missing markets fail to deliver. However, taxes distort labor supply and human capital investments. Uninsurable risk cumulates over the life cycle, and thus the welfare gains from income compression via progressive taxation increase ...
Working Paper
Time-varying Volatility and the Power Law Distribution of Stock Returns
While many studies find that the tail distribution of high frequency stock returns follow a power law, there are only a few explanations for this finding. This study presents evidence that time-varying volatility can account for the power law property of high frequency stock returns. The power law coefficients obtained by estimating a conditional normal model with nonparametric volatility show a striking correspondence to the power law coefficients estimated from returns data for stocks in the Dow Jones index. A cross-sectional regression of the data coefficients on the model-implied ...
Working Paper
Inflation at the Household Level
We use scanner data to estimate inflation rates at the household level. Households' inflation rates have an annual interquartile range of 6.2 to 9.0 percentage points. Most of the heterogeneity comes not from variation in broadly defined consumption bundles but from variation in prices paid for the same types of goods. Lower-income households experience higher inflation, but most cross-sectional variation is uncorrelated with observables. Households' deviations from aggregate inflation exhibit only slightly negative serial correlation. Almost all variability in a household's inflation rate ...
Working Paper
Estimating the marginal propensity to consume using the distributions of income, consumption and wealth
Recent studies of economic inequality almost always separately examine income, consumption, and wealth inequality and, hence, miss the important synergy among the three measures explicit in the life-cycle budget constraint. Using Panel Study of Income Dynamics data from 1999 through 2013, we examine whether these changes are more dramatic at higher or lower levels of wealth and find that the marginal propensity to consume is lower at higher wealth quintiles. This suggests that low-wealth households cannot smooth consumption as much as other households do, which further implies that increasing ...
Report
How Should Tax Progressivity Respond to Rising Income Inequality?
We address this question in a heterogeneous-agent incomplete-markets model featuring exogenous idiosyncratic risk, endogenous skill investment, and flexible labor supply. The tax and transfer schedule is restricted to be log-linear in income, a good description of the US system. Rising inequality is modeled as a combination of skill-biased technical change and growth in residual wage dispersion. When facing shifts in the income distribution like those observed in the US, a utilitarian planner chooses higher progressivity in response to larger residual inequality but lower progressivity in ...
Working Paper
Enduring Relationships in an Economy with Capital and Private Information
We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to an agent and his lifetime utility entitlement. The mapping implies properties that are distinct from those in private-information endowment models. In contrast to the endowment model, the value of the risk-sharing arrangement in our model always remains above autarky value, so there is no need for ...