"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
Abstract: This paper examines the role of information frictions in shaping parental beliefs over child development and intergenerational mobility by incorporating social learning into a heterogeneous-agent model of overlapping generations. Information frictions implicit in my model of social learning influence individual-specific beliefs about the return to parental investments in children's human capital and distort parental investment choices. I calibrate the model using data from the U.S. and show that its predictions are consistent with the evidence from a randomized controlled trial that changed parents' beliefs by providing them with information about child development. Using the calibrated model, I show that, in equilibrium, distortions in beliefs amplify the persistence of earnings across generations by 8.7%. A low-cost, large-scale policy that provides low-income parents with information about the return to parental investments generates a 4.2% increase in intergenerational mobility, not only because low-income parents are more certain about the impact of their investments and they increase investments in their children's human capital, but because these choices spill over into the beliefs held by the next generation.
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.
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