This article presents two simple calculations aimed at providing a first step in quantifying the costs of unanticipated financial shocks to a household. The two types of shocks considered are (1) an unanticipated drop in net worth and (2) an unexpected increase in the interest rate on borrowing....

Portfolio choice models counter factually predict (or advise) almost universal equity market participation and a high share for equity in wealth early in life. Empirically consistent predictions have proved elusive without participation costs, informational frictions, or non 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...

At first glance, college appears to be of great value to most, given its mean returns and sharply subsidized tuition. An empirically-disciplined human capital model that allows for variation in college readiness suggests otherwise: Nearly half of high school completers place zero value on access...

Portfolio choice models counter factually predict (or advise) almost universal equity market participation and a high share for equity in wealth early in life. Empirically consistent predictions have proved elusive without participation costs, informational frictions, or nonstandard preferences....

We study the implications of incarceration for the earnings and employment of different groups, characterized by their race, gender, and education. Our hidden Markov model distinguishes between first-time and repeat incarceration, along with other persistent and transitory nonemployment and...

A first glance at US data suggests that college -- given its mean returns and sharply subsidized cost for all enrollees -- could be of great value to most. Using an empirically-disciplined human capital model that allows for variation in college readiness, we show otherwise. While the top decile...