Working Papers

The Business Cycle Dynamics of the Wealth Distribution                                                                      R&R at JPE Macro
(with Jesse BrickerKamila Sommer, and Sarah Friedman) 
We use new disaggregated household balance sheet measures to quantify the business cycle dynamics of the wealth distribution in the US since 1989. After introducing these data and establishing their credibility, we show that wealth inequality is highly procyclical, mostly reflecting heterogeneous exposures to aggregate price risk, although group-specific asset return and saving dynamics also contribute. We next show that a decrease in the output gap and increase in the unemployment rate cause wealth inequality to increase and contribute to its procyclicality, as do accommodative monetary policy shocks. Finally, we show that the distribution of household balance sheets evolved very differently during the last two recessions. Our results imply that accurate models of wealth dynamics require a sufficiently rich portfolio choice problem.

Late-in-Life Risks and the Under-Insurance Puzzle
(with John Ameriks, Andrew CaplinMatthew Shapiro, and Chris Tonetti)
Individuals face significant late-in-life risks, including potential long-term care (LTC) needs. Yet they hold little corresponding insurance (LTCI). We investigate the degree to which a fundamental lack of interest, poor product features, and possible behavioral factors determine low LTCI holdings. We estimate a rich set of individual-level preferences and use a life-cycle model to find that ideal insurance would be far more widely held than are products in the market. We find that  laws in existing products provide only a partial explanation for this under-insurance puzzle, with analogous findings for the gap between estimated and actual annuity holdings. Our results derive from “strategic survey questions” that identify preferences as well as stated demand questions.


Windfall Gains and Stock Market Participation                                                     Journal of Financial Economics, Jan 2021
(with  David Cesarini,  Erik Lindqvist and Robert Östling)
We estimate the causal effect of wealth on participation in several asset markets using data on Swedish lottery players. A $150,000 windfall gain increases stock ownership probability by 12 percentage points among pre-lottery nonparticipants, with no discernible effect on pre-lottery stock owners. The effect is immediate, heterogeneous in intuitive ways, and smaller than predicted by a plausibly calibrated lifecycle model. Additional analyses suggest limited roles for real estate, debt, and procrastination. However, many players eschew equities for bonds, especially following periods of negative equity returns. Overall, results suggest that "nonstandard" beliefs or preferences contribute to equity nonparticipation across many demographic groups.

Long Term Care Utility and Late in Life Saving                                                                        Journal of Political Economy, June 2020
(with John Ameriks, Andrew Caplin, Matthew Shapiro, and Chris Tonetti )
Older wealthholders spend down assets slowly. To study this pattern, the paper introduces health dependent utility into a model in which different preferences for bequests, expenditures when in need of long-term care (LTC), and ordinary consumption combine with health and longevity uncertainty to determine saving behavior. To help separately identify motives, it develops Strategic Survey Questions (SSQs) that elicit stated preferences. The model is estimated using new SSQ and wealth data from the Vanguard Research Initiative. Estimates of the health-state utility function imply that motives associated with LTC are significantly more important than bequest motives in determining late in life saving.

Older Americans Would Work Longer If Jobs Were Flexible                                                        AEJ: Macro, Jan 2020 

(with John Ameriks, Andrew Caplin, Minjoon Lee, Chris Tonetti, and Matthew Shapiro)
Older Americans, even those who are long retired, have strong willingness to work, especially in jobs with flexible schedules. For many, labor force participation near or after normal retirement age is limited more by a lack of acceptable job opportunities or low expectations about finding them than by unwillingness to work longer. This paper establishes these findings using an approach to identification based on strategic survey questions (SSQs) purpose-designed to  complement behavioral data.  These findings suggest that demand-side factors are important in explaining late-in-life labor market behavior and may be the most appropriate target for policy aimed at promoting working longer.

The Distributional Financial Accounts of the United States                          NBER CRIW Conference Volume, March 2020

(with Michael Batty, Jesse Bricker, Sarah Friedman, Danielle Nemschoff, Eric Nielsen, Kamila Sommer, and Alice Henriques Volz)

Link to data

Link to earlier version
This paper describes the construction of the Distributional Financial Accounts (DFA), a dataset containing quarterly estimates of the distribution of US household wealth since 1989. The DFA builds on two existing Federal Reserve Board statistical products—quarterly aggregate measures of household wealth from the Financial Accounts of the United States, and triennial wealth distribution measures from the Survey of Consumer Finances—to incorporate distributional information into a national accounting framework. The DFA complements other sources by generating distributional statistics that are consistent with macro aggregates by providing quarterly data on a timely basis, and by constructing wealth distributions across demographic characteristics. We encourage policymakers, researchers, and other interested parties to use the DFA to better understand issues related to the distribution of US household wealth.


In Progress

​Wealth and the Propensity to Take Risk
(with David Cesarini,  Erik Lindqvist, and Robert Östling

​Risky Insurance
(with Chris Tonetti)
A Survey Approach to External Validation
(with Andrew Caplin, Søren Leth-Petersen, Chris Tonetti and Gianluca Violante)

​The Effect of Wealth on Worker Productivity: Evidence From Professional Golf Tournaments

Due Diligence: Job Search with Rationally Inattentive Workers
(with  Andrew Caplin, Daniel Martin, and Chris Tonetti)

The Precautionary Transfer Motive
(with John Ameriks, Andrew Caplin, Mi Luo, and Chris Tonetti)