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Working Paper
Taxing top earners: a human capital perspective
Badel, Alejandro; Huggett, Mark (2014-07-23)
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
Revisiting Capital-Skill Complementarity, Inequality, and Labor Share
Orak, Musa; Shen, Shihan; Ohanian, Lee E. (2021-05-19)
This paper revisits capital-skill complementarity and inequality, as in Krusell, Ohanian, Rios-Rull and Violante (KORV, 2000). Using their methodology, we study how well the KORV model accounts for more recent data, including the large changes in the labor's share of income that were not present in KORV. We study both labor share of gross income (as in KORV), and income net of depreciation. We also use nonfarm business sector output as an alternative measure of production to real GDP. We find strong evidence for continued capital-skill complementarity in the most recent data, and we also find ...
International Finance Discussion Papers , Paper 1319

Working Paper
When Do Informational Interventions Work? Experimental Evidence from New York City High School Choice
Cohodes, Sarah; Corcoran, Sean P.; Jennings, Jennifer; Sattin-Bajaj, Carolyn (2022-02-01)
This paper reports the results of a large, school-level randomized controlled trial evaluating a set of three informational interventions for young people choosing high schools in 473 middle schools, serving over 115,000 8th graders. The interventions differed in their level of customization to the student and their mode of delivery (paper or online); all treated schools received identical materials to scaffold the decision-making process. Every intervention reduced likelihood of application to and enrollment in schools with graduation rates below the city median (75 percent). An important ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 057

Working Paper
Non-Gravity Trade
Long, Ngo Van; Vespignani, Joaquin L.; Brueckner, Markus (2020-05-29)
This paper examines the relationship between countries’ bilateral trade with the United States that is not due to gravity (non-gravity trade) and the distribution of income within countries. In countries where only a small share of the population is educated, an increase in non-gravity trade is associated with a significant increase in income inequality. As education of the population increases, the correlation between non-gravity trade and income inequality becomes smaller. Non-gravity trade has no significant effect on income inequality in countries that are world leaders in education.
Globalization Institute Working Papers , Paper 388

Working Paper
Do Rising Top Incomes Lead to Increased Borrowing in the Rest of the Distribution?
Thompson, Jeffrey P. (2016-05-02)
One potential consequence of rising concentration of income at the top of the distribution is increased borrowing, as less affluent households attempt to maintain standards of living with less income. This paper explores the ?keeping up with the Joneses? phenomenon using data from the Survey of Consumer Finances. Specifically, it examines the responsiveness of payment-to-income ratios for different debt types at different parts of the income distribution to changes in the income thresholds at the 95th and 99th percentiles. The analysis provides some evidence indicating that household debt ...
Finance and Economics Discussion Series , Paper 2016-046

Working Paper
Changes in the Distribution of After-Tax Wealth: Has Income Tax Policy Increased Wealth Inequality?
Moore, Kevin B.; Looney, Adam (2015-06-05)
A substantial share of the wealth of Americans is held in tax-deferred form such as in retirement accounts or as unrealized capital gains. Most data and statistics on assets and wealth is reported on a pre-tax basis, but pre-tax values include an implicit tax liability and may not provide as accurate a measure of the financial position or material well-being of families. In this paper, we describe the distribution of tax-deferred assets in the SCF from 1989 to 2013, provide new estimates of the income tax liabilities implicit in those assets, and present new statistics on the level and ...
Finance and Economics Discussion Series , Paper 2015-58

Working Paper
Explaining Intergenerational Mobility: The Role of Fertility and Family Transfers
Kozlowski, Julian; Daruich, Diego (2016-11-16)
Poor families have more children and transfer less resources to them. This suggests that family decisions about fertility and transfers dampen intergenerational mobility. To evaluate the quantitative importance of this mechanism, we extend the standard heterogeneous agent life cycle model with earnings risk and credit constraints to allow for endogenous fertility, family transfers, and education. The model, estimated to the US in the 2000s, implies that a counterfactual flat income-fertility profile would-through the equalization of initial conditions-increase intergenerational mobility by ...
Working Papers , Paper 2018-011

Report
More Unequal We Stand? Inequality Dynamics in the United States, 1967–2021
Heathcote, Jonathan; Perri, Fabrizio; Violante, Giovanni L.; Zhang, Lichen (2023-08-01)
Heathcote et al. (2010) conducted an empirical analysis of several dimensions of inequality in the United States over the years 1967-2006, using publicly-available survey data. This paper expands the analysis, and extends it to 2021. We find that since the early 2000s, the college wage premium has stopped growing, and the race wage gap has stalled. However, the gender wage gap has kept shrinking. Both individual- and household-level income inequality have continued to rise at the top, while the cyclical component of inequality dominates dynamics below the median. Inequality in consumption ...
Staff Report , Paper 648

Working Paper
Labor Market Trends and the Changing Value of Time
Karabarbounis, Loukas; Boerma, Job (2019-09-20)
During the past two decades, households experienced increases in their average wages and expenditures alongside with divergent trends in their wages, expenditures, and time allocation. We develop a model with incomplete asset markets and household heterogeneity in market and home technologies and preferences to account for these labor market trends and assess their welfare consequences. Using micro data on expenditures and time use, we identify the sources of heterogeneity across households, document how these sources have changed over time, and perform counterfactual analyses. Given the ...
Working Papers , Paper 763

Working Paper
Do Greasy Wheels Curb Inequality?
Doniger, Cynthia L. (2019-03-27)
I document a disparity in the cyclicality of the allocative wage-the labor costs considered when deciding to form or dissolve an employment relationship-across levels of educational attainment. Specifically, workers with a bachelors degree or more exhibit an allocative wage that is highly pro-cyclical while high school dropouts exhibit no statistically discernible cyclical pattern. I also assess the response to monetary policy shocks of both employment and allocative wages across education groups. The less educated respond to monetary policy shocks on the employment margin while the more ...
Finance and Economics Discussion Series , Paper 2019-021

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