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Jel Classification:D91 

Report
Risk Preferences at the Time of COVID-19: An Experiment with Professional Traders and Students

We study whether the COVID-19 pandemic has impacted risk preferences, comparing the results of experiments conducted before and during the outbreak. In each experiment, we elicit risk preferences from two sample groups: professional traders and undergraduate students. We find that, on average, risk preferences have remained constant for both pools of participants. Our results suggest that the increases in risk premia observed during the pandemic are not due to changes in risk appetite; rather, they are solely due to a change in beliefs by market participants. The findings of our paper support ...
Staff Reports , Paper 927

Discussion Paper
Meet People Where They Are: Building Formal Credit Using Informal Financial Traditions

The Consumer Finance Institute hosted a workshop in February 2019 featuring José Quiñonez, chief executive officer, and Elena Fairley, programs director, of Mission Asset Fund (MAF) to discuss MAF’s approach to helping its clients improve access to mainstream financial markets. MAF’s signature program, Lending Circles, adapts a traditional community-based financial tool known as a rotating savings and credit association (ROSCA) to help establish or expand credit reports for participants who may not be able to do so through traditional means. Lending Circles have served more than 10,000 ...
Consumer Finance Institute discussion papers , Paper 20-01

Working Paper
Taxing top earners: a human capital perspective

We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model. The top of the model Laffer curve occurs at a 53 percent top tax rate. Tax revenues and the tax rate at the top of the Laffer curve are smaller compared to an otherwise similar model that ignores the possibility of skill change in response to a tax reform. We also show that if one applies the methods used by Diamond and Saez (2011) to provide quantitative guidance for setting the tax rate on top earners to model data then the resulting tax rate exceeds the tax rate at ...
Working Papers , Paper 2014-17

Working Paper
Health-care reform or labor market reform? a quantitative analysis of the Affordable Care Act

An equilibrium model with ?rm and worker heterogeneity is constructed to analyze labor market and welfare implications of the Patient Protection and Affordable Care Act (ACA). Our model implies a signi?cant reduction in the uninsured rate from 22.6 percent to 5.6 percent. {{p}} The model predicts a moderate positive welfare gain from the ACA, due to redistribution of income through Health Insurance Subsidies at the Exchange as well as Medicaid expansion. About 2.1 million more part-time jobs are created under the ACA, in expense of 1.6 million full-time jobs, mainly because the link between ...
Research Working Paper , Paper RWP 15-10

Working Paper
The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models

A standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the ?age profile" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that this approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I ...
Working Paper Series , Paper WP-2017-18

Working Paper
Assessing bankruptcy reform in a model with temptation and equilibrium default

A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to evaluate the 2005 bankruptcy law reform and other counterfactual reforms. The calibrated model indicates that the 2005 bankruptcy reform achieves its goal of reducing the number of bankruptcy filings, as seen in the data, but at the cost of loss in social welfare. The creditor-friendly reform provides borrowers with a stronger commitment to repay and thus yields lower default premia and better consumption smoothing. However, those who borrow and default due to temptation or ...
Working Papers , Paper 15-12

Working Paper
Returning to the Nest: Debt and Parental Co-residence Among Young Adults

This paper examines the relationship between a young adults' debt burden and the decision to co-reside with a parent. Using a quarterly panel of young adults' credit histories, and controlling for age, county, and quarter fixed effects, and local demographic characteristics, unemployment rates, and house prices, we estimate the relationship between current period debt and subsequent decisions to co-reside with a parent. Our results indicate that indebtedness--as measured by average loan balances, declining credit scores and delinquency on accounts--increases flows into parental co-residence. ...
Finance and Economics Discussion Series , Paper 2014-80

Journal Article
The State of Young Adults’ Balance Sheets: Evidence from the Survey of Consumer Finances

The authors investigate recent trends in the financial circumstances of young adults using data from the triennial Survey of Consumer Finances (SCF) from 2001 to 2013. They examine trends in young adults? net worth, break down the composition into specific assets and liabilities, and describe young adults? experiences with credit markets. The analysis focuses on three main comparisons: (i) trends over time (ii) between young adults and older adults and (iii) between young adults in 2013 (members of the ?Millennial Generation?) and young adults in 1989 (members of ?Generation X?). They find ...
Review , Volume 96 , Issue 4 , Pages 305-330

Report
Latent Heterogeneity in the Marginal Propensity to Consume

We estimate the unconditional distribution of the marginal propensity to consume (MPC) using clustering regression and the 2008 stimulus payments. Since we do not measure heterogeneity as the variation of MPCs with observables, we can recover the full distribution of MPCs. Households spent at least one quarter of the rebate, and individual households used rebates for different goods. While many observables are individually correlated with our estimated MPCs, these relationships disappear when tested jointly, except for nonsalary income and the average propensity to consume. Household ...
Staff Reports , Paper 902

Report
Intergenerational Redistribution in the Great Recession

We construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of big recessions are distributed across different household age groups. The model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages. Asset price declines hurt the old, who rely on asset sales to finance consumption, but benefit the young, who purchase ...
Staff Report , Paper 498

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