Wealth, finance, and the macroeconomy

We quantify behavioral responses to estate taxation by exploiting two large reforms in Taiwan. Using comprehensive administrative data and a difference-in-difference design, we show that the response of reported estates to the reforms is quick, persistent, and exhibits an asymmetry. We estimate elasticities of reported estates with respect to the net-of-tax rate of 2.76 (s.e. 0.39) for the tax increase and 1.31 (s.e. 0.16) for the tax cut. The asymmetry arises because liquid items such as financial assets, deposit savings, and charitable exemptions respond significantly more to a tax increase. The quick adjustments in reported estates, combined with a null effect on labor supply behavior among both donors and heirs, suggest the responses are likely driven by tax avoidance. The observed asymmetry can be explained by tax avoidance with sunk costs: taxpayers increase avoidance during a tax increase but are less responsive to a tax cut due to previously incurred avoidance costs. We set up a tax avoidance model and derive sufficient statistics, characterized by our estimated elasticities, to assess the welfare impact of tax reforms. Our analysis shows that using the tax cut elasticity, which is attenuated due to sunk costs, would underestimate the welfare cost and overestimate the net welfare effect of a tax increase by 61%.

Income inequality and worker migration significantly affect sovereign default risk. Governments often impose progressive taxes to reduce inequality, which redistribute income but discourage labor supply and induce emigration. Reduced labor supply and a smaller high-income workforce erode the current and future tax base, reducing government's ability to repay debt. I develop a sovereign default model with endogenous nonlinear taxation and heterogeneous labor to quantify this effect. In the model, the government chooses the optimal combination of taxation and debt, considering its impact on workers' labor and migration decisions. Income inequality accounts for one-fifth of the average US state government spread.

Our project advances the hypothesis that financial literacy could be one of the factors responsible for the gender gap in wealth, as financial knowledge helps individuals accumulate wealth, but women tend to be less financially literate than men.

This project studies the growing importance of high-net-worth individuals (HNWI) in private capital markets. While the role of institutional investors in private markets has already been studied, little attention has been paid to the participation of HNWI in these markets.

We use detailed data on stock portfolios of Norwegian households to show that stock market wealth increases entrepreneurship activity. Our research design isolates idiosyncratic, quasi-random variation in stock market returns. An increase in stock market wealth increases the propensity to start a firm, with the response concentrated in households with moderate levels of financial wealth, for whom a 20 percent increase in stock wealth increases the likelihood to start a firm by about 20%, and in years when the aggregate stock market return in Norway is high. We develop a method to study the effect of wealth on firm outcomes that corrects for the bias introduced by selection into entrepreneurship. An increase in stock market wealth also has a causal effect on initial firm size and profitability. The pass-through from stock wealth into equity in the new firm is one-for-one, indicating that higher stock market wealth relaxes would-be entrepreneurs' financial constraints.

We study optimal capital income and wealth taxation in an economy that reproduces the importance of private businesses for output and inequality. If entrepreneurs are subject to collateral constraints, they face heterogeneous rates of return, which generate a meaningful distinction between capital income and wealth taxation. We find that taxing capital income is preferable to taxing wealth because the efficiency gains from wealth taxation are swamped by the redistributional benefits of taxing the profits of richer entrepreneurs. Consequently, the gains from taxing wealth are modest. This conclusion is robust to the planner's preference for redistribution and allowing for nonlinear taxes.

This paper investigates the effects of wealth taxes on wealth accumulation, combining administrative data on wealth data Denmark and a theoretical life-cycle model of wealth accumulation.

The number of international students in American universities more than doubled in the last decade. These students disproportionately attend colleges in small urban economies, where local housing markets largely depend on student demand. This study estimates the impact of international students on home prices, rents, and residential construction.

How does technological change affect wealth accumulation and inequality of total (i.e. labour and capital) income over time? This paper focuses on automation – a capital intensive form of technological change.

In the wake of the Global Financial Crises (GFC), the GDP of most countries failed to recover and catch up with its previous trend. This paper studies the cause of the boom that preceded the crisis and ask whether it was sustainable, or even desirable in the first place.

For entrepreneurs and small business owners, housing is an important source of collateral for business loans. This paper explores the implications of changes in house prices for this sort of borrowing and for firm-level outcomes.