Search Results

Showing results 1 to 10 of approximately 15.

(refine search)
SORT BY: PREVIOUS / NEXT
Jel Classification:D30 

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 ...
Staff Report , Paper 615

Working Paper
Insurance and Inequality with Persistent Private Information

This paper studies the optimal tradeoff between insurance and inequality in economies with persistent private information.We consider a principal-agent model in which the principal insures the agent against privately-observed shocks to his endowment, which follows an ergodic finite-state Markov chain that may exhibit arbitrary serial correlation. The optimal contract always induces immiseration: the agent’s consumption and utility become arbitrarily negative in the long run. When the endowment is positively serially correlated, the optimal contract provides increasingly high-powered ...
Working Papers , Paper 2018-020

Working Paper
Insurance and Inequality with Persistent Private Information

We study optimal insurance contracts for an agent with Markovian private information. Our main results characterize the implications of constrained efficiency for long-run welfare and inequality. Under minimal technical conditions, there is Absolute Immiseration: in the long run, the agent?s consumption and utility converge to their lower bounds. When types are persistent and utility is unbounded below, there is Relative Immiseration: low-type agents are immiserated at a faster rate than high-type agents, and ?pathwise welfare inequality? grows without bound. These results extend and ...
Working Papers , Paper 2018-20

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 Series , Paper WP-2017-13

Working Paper
The Heterogeneous Effects of Government Spending : It’s All About Taxes

This paper investigates how government spending multipliers depend on the distribution of taxes across households. We exploit historical variations in the financing of spending in the U.S. since 1913 to show that multipliers are positive only when financed with more progressive taxes, and zero otherwise. We rationalize this finding within a heterogeneous-household model with indivisible labor supply. The model results in a lower labor responsiveness to tax changes for higher-income earners. In turn, spending financed with more progressive taxes induces a smaller crowding-out, and thus larger ...
International Finance Discussion Papers , Paper 1237

Working Paper
Wealth Distribution and Retirement Preparation Among Early Savers

This paper develops a new combined wealth measure using data from the Survey of Consumer Finances, by augmenting data on net worth with estimates of defined benefit (DB) pension wealth and expected Social Security wealth. We use this combined wealth concept to explore retirement preparation among groups of households in their pre-retirement years (40-49 and 50-59) and also to explore the concentration of wealth. We find evidence of moderate, but rising, shortfalls in retirement preparation. We also show that including DB pension and Social Security wealth results in markedly lower measures of ...
Finance and Economics Discussion Series , Paper 2020-043

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 ...
Finance and Economics Discussion Series , Paper 2016-022

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 ...
Working Papers , Paper 2020-034

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 ...
Working Papers , Paper 2020-034

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 ...
Staff Report , Paper 551

FILTER BY year

FILTER BY Content Type

Working Paper 12 items

Report 3 items

FILTER BY Jel Classification

D82 4 items

D12 3 items

E20 3 items

E31 3 items

H20 3 items

show more (24)

FILTER BY Keywords

PREVIOUS / NEXT