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Working Paper
Landlords and Access to Opportunity
Martin, Hal; Phillips, David; Aliprantis, Dionissi (2019-08-30)
Despite being eligible for use in any neighborhood, housing choice vouchers tend to be redeemed in low-opportunity neighborhoods. This paper investigates how landlords contribute to this outcome and how they respond to efforts to change it. We leverage a policy change in Washington, DC, that increased voucher rental payments only in high-rent neighborhoods. Using two waves of a correspondence experiment that bracket the policy change, we show that most opportunity landlords screen out prospective voucher tenants, and we detect no change in average screening behavior after a $450 per month ...
Working Papers , Paper 19-02R

Working Paper
The Ramsey Steady-State Conundrum in Heterogeneous-Agent Economies
Wen, Yi; Chien, YiLi (2022-09-15)
In infinite horizon, heterogeneous-agent and incomplete-market models, the existence of an interior Ramsey steady state is often assumed instead of proven. This paper makes two fundamental contributions: (i) We prove that the interior Ramsey steady state assumed by Aiyagari (1995) does not exist in the standard Aiyagari model. Specifically, a steady state featuring the modified golden rule and a positive capital tax is feasible but not optimal. (ii) We design a modified, analytically tractable version of the standard Aiyagari model to unveil the necessary and/or sufficient conditions for the ...
Working Papers , Paper 2022-009

Working Paper
Are Government Bonds Net Wealth or a Liability? ---Optimal Debt and Taxes in an OLG Model with Uninsurable Income Risk
Wu, HsinJung; Wen, Yi; Chien, YiLi (2020-04-08)
The rapidly growing national debt in the U.S. since the 1970s has alarmed and intrigued the academic world. Consequently, the concept of dynamic (in)efficiency in an overlapping generations (OLG) world and the importance of the heterogeneous-agents and incomplete markets (HAIM) hypothesis to justify a high debt-to-GDP ratio have been extensively studied. Two important consensus emerge from this literature: (i) The optimal quantity of public debt is positive—due to insufficient private liquidity to support private saving and investment (see, e.g., Barro (1974), Woodford (1990), and Aiyagari ...
Working Papers , Paper 2020-007

Working Paper
Don’t Tax Capital — Optimal Ramsey Taxation in Heterogeneous Agent Economies with Quasi-Linear Preferences
Wen, Yi; Chien, YiLi (2019-12-23)
We build a tractable heterogeneous-agent incomplete-markets model with quasi-linear preferences to address a set of long-standing issues in the optimal Ramsey taxation literature. The tractability of our model enables us to analytically prove the existence of a Ramsey steady state and establish several novel results: (i) Depending on the government's capacity to issue debt, there can exist different types of Ramsey steady states but they have the same implications for optimal long-run tax policies. (ii) The optimal capital tax is exclusively zero in a Ramsey steady state regardless of the ...
Working Papers , Paper 2019-007

Working Paper
The Determination of Public Debt under both Aggregate and Idiosyncratic Uncertainty
Wen, Yi; Chien, YiLi (2019-12-26)
We analyze the Ramsey planner's decisions to finance stochastic public expenditures under incomplete insurance markets for idiosyncratic risk. We show analytically that whenever the market interest rate lies below the time discount rate, the Ramsey planner has a dominant incentive to increase debt to meet the private sector's demand for full self-insurance regardless of the relative size of aggregate shocks---suggesting a departure from tax smoothing. However, if a full self-insurance Ramsey allocation is infeasible in the absence of a government debt limit, an interior or bounded Ramsey ...
Working Papers , Paper 2019-038

Working Paper
Are Government Bonds Net Wealth or a Liability? ---Optimal Debt and Taxes in an OLG Model with Uninsurable Income Risk
Wu, HsinJung; Wen, Yi; Chien, YiLi (2021-01-03)
A positive national debt is often rationalized either by the assumption of dynamic inefficiency in an overlapping-generations (OLG) model, or by the hypothesis of heterogeneous-agents and incomplete-markets (HAIM) in an infinite horizon model. Both assumptions imply insufficient private liquidity to support private saving and investment, thus calling for a positive level of public debt to improve social welfare. However, since public debt is financed often by distortionary future taxes, optimal debt and tax policies ought to be studied jointly in a single framework. In this paper we use a ...
Working Papers , Paper 2020-007

Working Paper
Implementing the Modified Golden Rule? Optimal Ramsey Capital Taxation with Incomplete Markets Revisited
Yang, C.C.; Chen, Yunmin; Chien, YiLi (2020-10-01)
What is the prescription of Ramsey capital taxation in the long run? Aiyagari (1995) addressed the question in a heterogeneous-agent incomplete-markets (HAIM) economy, showing that a positive capital tax should be imposed to implement the so-called modified golden rule (MGR). In deriving the MGR result, Aiyagari (1995) implicitly assumed that the multiplier on the resource constraint of the Ramsey problem converges to a finite positive value in the limit. We first show that this implicit assumption has a strong implication for the shadow price of Ramsey taxation in the limit: it must go to ...
Working Papers , Paper 2017-003

Journal Article
U.S. Federal Debt Has Increased, but Appears Sustainable for Now
Bi, Huixin; Yang, Shu-Chun S.; Shen, Wenyi (2020-11-16)
The unprecedented fiscal stimulus packages that Congress passed earlier this year provided timely assistance to households and businesses, but also led to a sharp increase in U.S. federal government debt. We find that the current net federal debt level of about 100 percent of GDP does not pose a threat to fiscal sustainability. Over a longer horizon, debt sustainability will depend, to a large extent, on whether the federal government can curb mandatory spending or raise taxes.
Economic Bulletin

Working Paper
Optimal Ramsey Taxation in Heterogeneous Agent Economies with Quasi-Linear Preferences
Wen, Yi; Chien, YiLi (2021-07-26)
We build a tractable heterogeneous-agent incomplete-markets model with quasi-linear preferences to address a set of long-standing issues in the optimal Ramsey taxation literature. The tractability of our model enables us to analytically prove the existence of the Ramsey steady state and establish several novel results within standard parameter spaces: (i) The failure of the modified golden rule (MGR) cannot by itself justify a positive steady-state capital tax—we prove that in the absence of wealth redistribution effects the optimal capital tax is exclusively zero in the Ramsey steady state ...
Working Papers , Paper 2019-007

Working Paper
The Determination of Public Debt under both Aggregate and Idiosyncratic Uncertainty
Wen, Yi; Chien, YiLi (2022-04-28)
We use an analytically tractable, heterogeneous-agent incomplete-markets model to show that the Ramsey planner's decision to finance stochastic public expenditures implies a departure from tax smoothing and an endogenous mean-reverting force to support positive debt growth despite the government's precautionary saving motives. Specifically, the government's attempt to balance the competing incentives between its own precautionary saving (tax smoothing) and households' precautionary saving (individual consumption smoothing)---even at the cost of extra tax distortion---implies an endogenous, ...
Working Papers , Paper 2019-038

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