The standard model of permanent and transitory income is known to be misspecified. Estimates of income volatility in the model differ depending on the type of data moments used—levels or differences—and how these moments are weighted in the estimation. We propose two changes to the standard...

Participation in the stock market is limited, especially early in life. By contrast, human capital investment is widespread, especially early in life. Returns to equity are constant across households, while returns to human capital vary. The contribution of this paper is to demonstrate that once...

Why do more educated workers experience lower unemployment rates and lower employment volatility? A closer look at the data reveals that these workers have similar job finding rates, but much lower and less volatile separation rates than their less educated peers. We argue that on-the-job...

Why do more educated workers experience lower unemployment rates and lower employment volatility? A closer look at the data reveals that these workers have similar job finding rates, but much lower and less volatile separation rates than their less educated peers. We argue that on-the-job...

This paper considers the impact of endogenous human capital accumulation on optimal tax policy in a life cycle model. Including endogenous human capital accumulation, either through learning-by-doing or learning-or-doing, is analytically shown to create a motive for the government to use...

This paper considers the impact of how human capital is accumulated on optimal capital tax policy in a life cycle model. In particular, it compares the optimal capital tax when human capital is accumulated exogenously, endogenously through learning-by-doing, and endogenously through...

The widespread emergence of intangible technologies in recent decades may have significantly hurt output growth -- even when these technologies replaced considerably less productive tangible technologies -- because of structurally low interest rates caused by demographic forces. This insight is...

We estimate the marginal propensity to consume (MPC) out of permanent and transitory shocks to house price appreciation. We consider two different models under which those shocks may affect consumption. In the first one, housing is a risky asset. In the second one, housing has a role as a...

We use an overlapping generation model to explore the implications of mortality during pandemics for the economy's productive capacity. Under current epidemiological projections for the progression of COVID-19, our model suggests that mortality will have, in itself, at most small effects on...

Over the last four decades, the U.S. economy has experienced a few secular trends, each of which may be considered undesirable in some aspects: declining labor share; rising profit share; rising income and wealth inequalities; and rising household sector leverage and associated financial...