Research Statement (August 2025)
Publications
Changing Income Risk Across the U.S. Skill Distribution: Evidence from a Generalized Kalman Filter
Joint with Kyle Herkenhoff, Jonathan Rothbaum, and Lawrence Schmidt
Forthcoming at American Economic Review.
Abstract: For whom has earnings risk changed, and why? We answer these questions by combining the Kalman filter and EM-algorithm to estimate persistent and temporary earnings for every individual at every point in time. We apply our method to administrative earnings linked with survey data. We show that since the 1980s, persistent earnings risk rose by 20% for both employed and unemployed workers and the scarring effects of unemployment doubled. At the same time, temporary earnings risk declined. Using education and occupation codes, we show that rising persistent earnings risk is concentrated among high-skill workers and related to technology adoption.
Technological Change and Insuring Job Loss
Joint with Bledi Taska
[Slides]
Conditionally accepted at Review of Economic Dynamics.
Abstract: We examine the role of technological change in shaping insurance to the unemployed. We integrate technological change, occupation choice, and employment risk into a Bewley-style economy to examine the optimal combination of retraining subsidies and public insurance transfers for unemployed workers. We find that the optimal policy introduces a retraining subsidy to unemployed workers and increases the generosity of transfers to the unemployed relative to current U.S. policy. The utilitarian government incorporates retraining subsidies as part of an optimal policy as they provide additional, longer run, consumption insurance after job loss while imposing only modest increases in distortionary taxes. In the absence of technological change, a utilitarian government sets a lower subsidy on the tuition cost of retraining as earnings declines after job loss are less persistent.
Can the Unemployed Borrow? Implications for Public Insurance
Joint with Kyle Herkenhoff and Gordon Phillips
Journal of Political Economy, 132(9): 2881-3214.
Abstract: We empirically establish that unemployed individuals maintain significant access to credit and that upon layoff, the unconstrained borrow, while the constrained default and delever. Motivated by these findings, we develop a theory of credit lines and labor income risk to analyze optimal transfers to the unemployed. Since the terms of credit lines are fixed, credit lines are unresponsive to job loss and provide greater consumption insurance relative to when debt is repriced period-by-period. Given U.S. levels of credit lines, the government optimally reduces transfers to the unemployed, whereas it is less able to reduce transfers when debt is re-priced period-by-period.
Technological Change and the Consequences of Job Loss (Job Market Paper)
Joint with Bledi Taska
[Skill req. by occupation data] [Online appendix] [Heterogeneous Effects of Technological Change]
Coverage: Visible Hand Podcast
American Economic Review, 113(2): 279-316. Lead Article.
Abstract: We examine the role of technological change in explaining the large and persistent decline in earnings following job loss. Using detailed skill requirements from the near universe of online vacancies, we estimate technological change by occupation and find that 45% of the decline in earnings after job loss is due to technological change. Technological change lowers earnings after job loss by requiring workers to have new skills to perform newly created jobs in their prior occupation. When workers do not have the required skills, they move to occupations where their skills are still employable but are paid a lower wage.
Papers Under Revision
Intergenerational Mobility and Credit
Joint with Nisha Chikhale, Kyle Herkenhoff, and Gordon Phillips
[Slides] [NBER Working Paper] Coverage: Forbes, IZA Opinion Piece
Revise & Resubmit at Review of Economic Studies, Updated December 2023.
Abstract: We combine the Decennial Census, credit reports, and administrative earnings to create the first panel dataset linking parent's credit access to the labor market outcomes of children in the U.S. We find that a 10% increase in parent's unused revolving credit during their children's adolescence (13 to 18 years old) is associated with 0.28% to 0.37% greater labor earnings of their children during early adulthood (25 to 30 years old). Using these empirical elasticities, we estimate a dynastic, defaultable debt model to examine how the democratization of credit since the 1970s -- modeled as both greater credit limits and more lenient bankruptcy -- affected intergenerational mobility. Surprisingly, we find that the democratization of credit led to less intergenerational mobility and greater inequality. Two offsetting forces underlie this result: (1) greater credit limits raise mobility by facilitating borrowing and investment among low-income households; (2) however, more lenient bankruptcy policy lowers mobility since low-income households dissave, hit their constraints more often, and reduce investments in their children. Quantitatively, the democratization of credit is dominated by more lenient bankruptcy policy and so mobility declines between the 1970s and 2000s.
Working Papers
Rising Risk Among the Rich: Implications for Wealth Inequality and Interest Rates
Joint with Kyle Herkenhoff, Chengdai Huang, Michael Nattinger, Jonathan Rothbaum, and Lawrence Schmidt
Abstract: We estimate the evolution of permanent and transitory income risk across the income distribution and over time using newly-digitized and longitudinally-linked Census-IRS tax returns. Since the 1970s, the variance of permanent income shocks (i.e., permanent income risk) has increased by over 65% for those in the top 5% of the income distribution. Using capitalized interest and dividend income, we also document that high income households save significantly more in response to increases in permanent income risk compared to lower income households. To examine the implications of rising permanent income risk among high income households we integrate our income process into a Bewley-Huggett-Aiyagari model and calibrate the model to be consistent with our savings elasticities. We find that increasing permanent income risk among high income households has put downward pressure on interest rates and increased wealth inequality.
Declining Population Growth and Wages
Abstract: Population growth is declining in the U.S. and around the world. I examine how declining population growth impacts wage growth and hiring. Using a labor search model with population growth, I show that declining population growth leads to lower hiring and wage growth. Exploiting variation across U.S. states and multiple instruments for working age population growth, I find that a 1pp decline in population growth is associated with a 1.2 to 1.3pp decline in 12 month wage growth and a 2.5 to 2.7pp decline in the monthly rate of hires out of unemployment.
Federal Reserve Publications
Has Durable Goods Spending Become Less Sensitive to Interest Rates?
Joint with Willem Van Zandweghe
Federal Reserve Bank of Kansas City Economic Review, fourth quarter, 98(4): 5-27.
What Drivers Consumer Debt Dynamics?
Joint with Edward Knotek II
Federal Reserve Bank of Kansas City Economic Review, fourth quarter, 97(4): 31-54.
Resting Papers
Consumer Debt Dynamics: Follow the Increasers
Joint with Edward Knotek II
Abstract: Consumer debt played a central role in creating the U.S. housing bubble, the ensuing housing downturn, and the Great Recession, and it has been blamed as a factor in the weak subsequent recovery as well. This paper uses micro-level data to decompose consumer debt dynamics by separating the actions of consumer debt increasers and decreasers, and then further decomposing movements into percentage (extensive) and size (intensive) margins among the increasers and decreasers. We view such a decomposition as informative for macroeconomic models featuring a central role for consumer debt. Using this framework, we show that variations in borrowing activity among the increasers explain four times as much of the total variation in consumer debt as variations among the decreasers who are shedding debt, whether through paydowns or defaults. We provide micro-level evidence of a large and sustained decline in the percentage of increasers during the financial crisis that is qualitatively consistent with a binding zero lower bound on nominal interest rates, and evidence of a cycle in the average size of debt changes among the increasers that is related to rising collateral values pre-crisis coupled with additional financial frictions after the crisis. In the context of heterogeneous agent models with uninsurable idiosyncratic risk, we show how the percentage of increasers can help to discipline the contours of consumer deleveraging.