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Keywords:heterogeneity 

Discussion Paper
Understanding the Racial and Income Gap in COVID-19: Social Distancing, Pollution, and Demographics

This is the third post in a series looking to explain the gap in COVID-19 intensity by race and by income. In the first two posts, we have investigated whether comorbidities, uninsurance, hospital resources, and home and transit crowding help explain the income and minority gaps. Here, we continue our investigation by looking at three additional potential channels: the fraction of elderly people, pollution, and social distancing at the beginning of the pandemic in the county. We aim to understand whether these three factors affect overall COVID-19 intensity, whether the income and racial gaps ...
Liberty Street Economics , Paper 20210112c

Working Paper
Bubbles and Leverage: A Simple and Unified Approach

In this paper, we lay out a simple framework that captures much of what the theoretical literature has to say about the role of credit in systemically important asset booms and busts. In addition, we suggest ways in which to incorporate physical investment in the bubble asset as well as monetary policy.
Working Paper Series , Paper WP-2013-21

Working Paper
Heterogeneity in Decentralized Asset Markets

We study a search and bargaining model of asset markets in which investors? heterogeneous valuations for the asset are drawn from an arbitrary distribution. We present a solution technique that makes the model fully tractable, and allows us to provide a complete characterization of the unique equilibrium, in closed form, both in and out of steady state. Using this characterization, we derive several novel implications that highlight the importance of heterogeneity. In particular, we show how some investors endogenously emerge as intermediaries, even though they have no advantage in contacting ...
Working Papers , Paper 19-44

Working Paper
The Piketty Transition

We study the effects on inequality of a "Piketty transition" to zero growth. In a model with a worker-capitalist dichotomy, we show first that the relationship between inequality (measured as a ratio of incomes for the two types) and growth is complicated; zero growth can raise or lower inequality, depending on parameters. Extending our model to include idiosyncratic wage risk we show that growth has quantitatively negligible effects on inequality, and the effect is negative. Finally, following Piketty?s thought experiment, we study how the transition might occur without declining returns; ...
Working Papers (Old Series) , Paper 1432

Working Paper
Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job Ladder Risk vs. Human Capital

We study the determinants of lifetime earnings (LE) inequality in the U.S. by focusing on job ladder dynamics and on-the-job learning as sources of wage growth. Using administrative data, we document that i) lower LE workers change jobs more often, which is mainly driven by nonemployment; ii) average annual earnings growth for job stayers is similar, around 2% in the bottom two-thirds of the LE distribution, whereas for job switchers it rises with LE; iii) top LE workers enjoy around 10% average earnings growth regardless of job switching. We estimate a job ladder model with on-the-job ...
Working Papers , Paper 2022-002

Working Paper
Liquidity, Capital Pledgeability and Inflation Redistribution

We study the redistributive effects of expected inflation in a microfounded monetary model with heterogeneous discount factors and collateral constraints. In equilibrium, this heterogeneity leads to borrowing and lending. Model assumptions also guarantee a tractable distribution of money and capital holdings. Several results emerge from our analysis. First, in this framework expected inflation is detrimental to capital accumulation. Second, expected inflation affects borrowing and lending when collateral constraints are present, thus also inducing redistributive effects through credit. Third, ...
Working Papers , Paper 21-26

Working Paper
Wealth Inequality and Return Heterogeneity During the COVID-19 Pandemic

Wealth inequality in the U.S., measured by the top 1% wealth share, experienced dramatic changes in the first year of the COVID-19 pandemic. Economic theory suggests that the key to understanding wealth inequality is heterogeneity in the return to net worth across households. To understand the dynamics of wealth inequality during the COVID-19 pandemic, we develop a novel methodology that allows us to estimate the returns to net worth for different groups of households at relatively high frequency. We show that portfolio heterogeneity and asset price movements are the main determinants of ...
Working Papers , Paper 2114

Report
How do mortgage refinances affect debt, default, and spending? Evidence from HARP

We use quasi-random access to the Home Affordable Refinance Program (HARP) to identify the causal effect of refinancing a mortgage on borrower balance sheet outcomes. We find that on average, refinancing into a lower-rate mortgage reduced borrowers' default rates on mortgages and nonmortgage debts by about 40 percent and 25 percent, respectively. Refinancing also caused borrowers to expand their use of debt instruments, such as auto loans, home equity lines of credit (HELOCs), and other consumer debts that are proxies for spending. All told, refinancing led to a net increase in debt equal to ...
Staff Reports , Paper 841

Discussion Paper
Black and White Differences in the Labor Market Recovery from COVID-19

The ongoing COVID-19 pandemic and the various measures put in place to contain it caused a rapid deterioration in labor market conditions for many workers and plunged the nation into recession. The unemployment rate increased dramatically during the COVID recession, rising from 3.5 percent in February to 14.8 percent in April, accompanied by an almost three percentage point decline in labor force participation. While the subsequent labor market recovery in the aggregate has exceeded even some of the most optimistic scenarios put forth soon after this dramatic rise, the recovery has been ...
Liberty Street Economics , Paper 20210209c

Working Paper
Financial Contracting with Enforcement Externalities

We study the negative feedback loop between the aggregate default rate and the efficacy of enforcement in a model of debt-financed entrepreneurial activity. The novel feature of our model is that enforcement capacity is accumulated ex ante and thus subject to depletion ex post. We characterize the effect of shocks that deplete enforcement resources on the aggregate default rate and credit supply. In the model default decisions by entrepreneurs are strategic complements, leading to multiple equilibria. We propose a global game selection to overcome equilibrium indeterminacy and show how shocks ...
Working Papers , Paper 18-21

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