"The Effects of Uncertainty Shocks: Implications of Wealth Inequality," European Economic Review 154, no. C (2023).
Abstract: This paper investigates whether and how the effects of time-varying macroeconomic uncertainty depend on the distribution of wealth. I show that increases in wealth inequality amplify the responses of uncertainty shocks. Using deciles of the distribution of wealth along with a series of macroeconomic volatility for the United States, I find that consumption growth falls by approximately 0.25 percentage points more in response to a one standard deviation uncertainty shock when wealth inequality is high relative to when it is low. In order to understand the nonlinear effects of uncertainty on consumption growth, I consider a two-agent New Keynesian model. I calibrate this simple model to qualitatively match the empirical responses of consumption growth to a one standard deviation uncertainty shock and show that nominal rigidities are key to magnifying the effects of uncertainty under high wealth inequality.
Work In Progress
"Intergenerational Mobility and Credit," with J. Carter Braxton, Kyle Herkenhoff, and Gordon Phillips
Abstract: To what extent – and through what channels – does parental credit access affect the future earnings of children? How has the expansion of credit markets since the 1970s impacted inequality and mobility? To answer these questions, we combine the Decennial Census, credit reports, and administrative earnings records to create the first panel dataset linking parental credit access to the labor market outcomes of children in the U.S. We find that a 10% increase in parental unused revolving credit during their children’s adolescence (13 to 18 years old) is associated with 0.28% to 0.37% greater labor earnings of their children during early adulthood (25 to 30 years old), regardless of the educational attainment of the child or parent. We examine the mechanisms for this finding and show that increased parental credit access is associated with their children having higher rates of college graduation, fewer non employment spells, and a greater likelihood of working at higher paying firms. We then use our empirical elasticities to estimate a theory of dynastic households with defaultable debt to examine how the expansion of credit markets impacts inequality and intergenerational mobility. The expansion of credit has reduced intergenerational mobility and increased inequality as the decrease in bankruptcy costs has reduced savings and investment in children’s human capital among low income households.
"Parental Beliefs, Social Learning, and Intergenerational Mobility" (JMP)
Abstract: This paper explores the role of information frictions in shaping parental beliefs over child development and parental investment behavior. I study whether information frictions can explain local distortions in parental beliefs, how they influence parental behavior, and how they contribute to intergenerational mobility. This paper presents a dynastic model of intergenerational mobility where parents learn about child development from their own experiences and that of their social connections. Differences in social interactions across the distribution of income generate information frictions that systematically distort parental beliefs and behavior. I calibrate the model to the United States and show that it is consistent with empirical evidence that documents the effect of parental beliefs on parental inputs. I then use the model to examine the implications of social learning on intergenerational earnings mobility. I find that subjective parental beliefs play an important role in amplifying the persistence of earnings across generations. Indeed, economic mobility is reduced by 5.5% in the model with information frictions generated by social learning relative to the world of social integration in which parents' social connections are representative.
"The Scarring Effects of Workplace Sexual Harassment," with Natalie Duncombe and Birthe Larsen
Abstract: We document new facts about the sources and consequences of sexual harassment in the workplace using administrative and survey data from Denmark. We estimate that following workplace sexual harassment, victims see earnings losses. Losses are higher when workplace harassment is due to coworkers rather than clients, and for those who move jobs. We also find that labor market tightness plays a key role in an individual's ability to escape workplace sexual harassment. We then incorporate workplace sexual harassment into a labor search model to analyze to what degree labor market friction affects the cost of workplace sexual harassment. We use the model to analyze policies targeted at reducing workplace sexual harassment in the presence of labor market frictions.
Power, violence, and consequences at work, Federal Reserve Bank of Minneapolis, January 2023
Household Insecurity Matters for U.S. Macroeconomic Stability, Washington Center for Equitable Growth, May 2018