This article asks whether household heterogeneity and market incompleteness have quantitatively important implications for the welfare effects of tax changes. We compare a representative-agent economy to an economy in which households face idiosyncratic uninsurable income risk. The income...

We combine publicly available data from Freddie Mac, the Decennial Census of Housing, and the Bureau of Economic Analysis to construct the first constant-quality aggregate price index for the stock of residential land in the United States. We uncover five main results: (a) since 1970,...

We investigate the welfare implications of eliminating a proportional capital income tax for a model economy in which heterogeneous households face labor income risk and trade only one asset. Labor taxes rises at the time of the reform to maintain long run budget balance. Our stochastic process...

This paper develops an analytical framework to study consumption and labour supply in a rich class of heterogeneous-agent economies with partial insurance. The environment allows for trade in non-contingent and state-contingent bonds, for permanent and transitory idiosyncratic productivity...

This paper serves as an empirical companion piece for "Housing and the Business Cycle" by Davis and Heathcote (2000). A large part of the paper is devoted to documenting the growth, variability, and co-movement of major macroeconomic variables. We pay particular attention to the business cycle...

Over the period 1973-1985, the correlations of GDP, employment and investment between the United States and an aggregate of major trading partners were respectively 0.76, 0.67, and 0.61. Between 1986-1998 the same correlations were much lower: 0.25, -0.19, and 0.16 (real regionalization). At the...

Periods of low household wealth in United States macroeconomic history have also been periods of high business cycle volatility. This paper develops a simple model that can exhibit self-fulfilling fluctuations in the expected path for unemployment. The novel feature is that the scope for...

This paper offers a quantitative exploration of optimal income tax design in the Mirrlees tradition, and asks how nearly simple parametric tax functions can decentralize constrained efficient allocations. The environment features both observable and unobservable components of idiosyncratic labor...

This paper is structured in three parts. The first part outlines the methodological steps, involving both theoretical and empirical work, for assessing whether an observed allocation of resources across countries is efficient. The second part applies the methodology to the long-run allocation of...

What shapes the optimal degree of progressivity of the tax and transfer system? On the one hand, a progressive tax system can counteract inequality in initial conditions and substitute for imperfect private insurance against idiosyncratic earnings risk. At the same time, progressivity reduces...