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Journal Article
1960s Interstate Highways and Homeowner Wealth Distribution
This article studies house-level real estate wealth distribution changes nearby a major interstate highway, comparing values before the announcement of the highway's construction (1940) with those during and shortly after the construction period (1961-74). We also develop Lorenz curves to examine the distribution of housing wealth among various demographic groups of homeowners. First, we find that properties at least a half-mile away from I-84 experienced statistically significant appreciation (on average). Houses further away, in 0.25 mile increments up to 1.25 miles, appreciated less. Our ...
Briefing
A More Comprehensive Measure of the Black-White Wealth Gap
In this article, we apply a simple graphical device — the plot of the relative rank distribution — to summarize the Black-White wealth gap. We also introduce the relative rank Gini coefficient — an analog to the standard Gini coefficient — as a summary measure of rank inequality. We find that the rank wealth gap is widest in the middle of the wealth distribution. Black-White rank wealth gaps are higher among college graduates than among other education groups. Households with young or retired heads have higher rank gaps than middle-aged households. We caution that rank gaps are not ...
Working Paper
Should Capital Be Taxed?
We design an infinite-horizon heterogeneous-agents and incomplete-markets model to demonstrate analytically that in the absence of any redistributional effects of government policies, optimal capital tax is zero despite capital overaccumulation under precautionary savings and borrowing constraints. Our result indicates that public debt is a better tool than capital taxation to restore aggregate productive efficiency.
Journal Article
Spotlight on Research: The Distributional Impact of Negative Equity
The fallout from the recent meltdown in the housing market continues to afflict many homeowners today. A great deal of attention has been focused on the debilitating effects of a rise in foreclosures and falling house prices that accompanied the market downturn. The depressing effect of foreclosures on house prices has presented several challenges to homeowners. Declining home values have resulted in a number of homeowners owing more on their mortgage than their home is worth. Thus, the homeowners are saddled with negative equity, which is commonly referred to as ?being under water.? ...
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 ...
Working Paper
Should Capital Be Taxed?
We design an infinite-horizon heterogeneous-agents and incomplete-markets model to demonstrate analytically that in the absence of any redistributional effects of government policies, optimal capital tax is zero despite capital overaccumulation under precautionary savings and borrowing constraints. Our result indicates that public debt is a better tool than capital taxation to restore aggregate productive efficiency.
Silver Spoon or Self-Made? Exploring 23 Years of Wealth Mobility
An analysis of the changes in wealth distribution as individuals age from their late 20s to early 50s reveals a substantial degree of persistence at the top 1%.
Working Paper
Unemployment Insurance when the Wealth Distribution Matters
This paper analyzes the welfare effects of unemployment insurance in a life-cycle model, focusing on partial vs. general equilibrium effects. We study an OLG economy with learning-by-doing human capital accumulation. Agents can be employed or unemployed. While unemployed agents costly search for new jobs. We calibrate the model to the U.S. economy, and find that replacement ratio and potential duration are close to the current one. But, in contrast with the previous literature, we find that the optimal policies under general and partial equilibrium are almost the same. Through a series of ...
Working Paper
Monetary Policy with Racial Inequality
I develop a heterogeneous-agent New-Keynesian model featuring racial inequality in income and wealth, and studies interactions between racial inequality and monetary policy. Black and Hispanic workers gain more from accommodative monetary policy than White workers mainly due to higher labor market risks. Their gains are larger also because of a larger proportion of them are hand-to-mouth, while wealthy White workers gain more from asset price appreciation. Monetary and fiscal policies are substitutes in providing insurance against cyclical labor market risks. Racial minorities gain even more ...
Report
Crime, house prices, and inequality: the effect of UPPs in Rio
We use a recent policy experiment in Rio de Janeiro, the installation of permanent police stations in low-income communities (or favelas), to quantify the relationship between a reduction in crime and the change in the prices of nearby residential real estate. Using a novel data set of detailed property prices from an online classifieds website, we find that the new police stations (called UPPs) had a substantial effect on the trajectory of property values and certain crime statistics since the beginning of the program in late 2008. We also find that the extent of inequality among residential ...