Theories are ambiguous about whether households of higher or lower wealth consistently trade against expected returns. I employ unique matched data on US household trades in the housing market and their wealth to study trade timings and quantify the impact on portfolio returns and wealth inequality. I find that poorer households consistently buy houses when expected returns are low (e.g., after price increases) and sell when expected returns are high (e.g., after price declines). The estimated dispersion in expected portfolio returns from active trades is large, with an interquartile range across the wealth distribution of 65 basis points per year.

An earlier version circulated under the title “Cyclical Transactions and Wealth Inequality.” 

Media: Business Insider, Bloomberg, Hutchins

We investigate whether unequal access explains why low-income and Black households use bank  branches less than high-income and White households, despite relying on them more. We obtain a measure of access from a gravity model of consumer trips to bank branches, estimated using mobile device geolocation data. We find no evidence that low-income communities lack access, and instead find that lower demand for branch products or services explains their lower branch use. But in Black communities, poor access explains their entire drop-off in branch use. The results spotlight areas of the country to best target policies expanding access to banking.

Media: Yale Insights, Economic Mobility Project

We study the effect of racial minority bank ownership on minority credit access. Using new data for 87 million minority borrowers, we present four main findings. First, minority-owned banks specialize in same-race mortgage lending. Over 70 percent of their mortgages go to borrowers of bank owners' same race. Second, the effect of minority bank ownership on minority credit is large and exceeds that of minority loan officers. We find that minority borrowers applying for mortgages in banks whose owners are of the same minority group are nine percentage points more likely to be approved than minority borrowers in non-minority banks. This effect is over six times that of a minority loan officer. Third, the default rate of minority banks' same-race borrowers is much lower than that of otherwise-identical borrowers of other races, and Asian banks drive this difference. Fourth, evidence from plausibly exogenous bank collapses suggests that the effect of Asian bank ownership might reflect an expansion rather than a reallocation of credit to Asian borrowers. Our findings are consistent with minority bank ownership reducing information frictions and improving credit allocations.

Do Black electoral victories impact White Americans’ racial bias? I use explicitly elicited racial preferences and Race Implicit Attitude Test scores to measure racial bias, construct a novel data set on local elections that identifies candidates’ perceived racial groups, and implement a close-election regression-discontinuity design for causal inference. Black electoral victories cause both implicit and explicit measures of racial bias to rise. Simultaneously, they widen racial gaps in unemployment and mortgage denials.

We argue that a long-term low interest rate environment can cause labor income inequality, the emergence of the working rich, and reduced intergenerational mobility. We provide a simple model with endogenous human capital accumulation and credit constraints to demonstrate this causal link. The mechanism operates through a tilting of the human capital gradient: wealthy households, more so than poor households, will increase human capital investment in response to low rates. Normatively, these tilting responses to low rates are inefficient, but higher capital taxes is not an ideal response. We find empirical support for our tilting mechanism over the last 60 years in the US. Quantitatively, we show that the endogenous human capital investment response to low interest rates can account for a 17% rise in cross-sectional labor income variance (higher inequality) and a 7% higher parent-child labor income inter-generational elasticity (lower mobility).

We estimate intergenerational elasticities (IGE) of consumption and income in the US. Complementary to income IGE, consumption mobility is a closer measure of welfare mobility, and comparisons with income IGE inform intergenerational consumption insurance. Using surnames to link 1940 and 2015, and using housing consumption and Engel curves to infer total consumption, we estimate a one-generation consumption IGE of 0.72, higher than that of income at 0.52.We formalize surname-level inference and address ecological inference and noisy family linkages. Consumption IGE is higher for White compared to Black Americans and higher in the Northeast, patterns that contrast with income IGE.

A capital influx into local housing markets would be expected to increase house prices, but the spillover effect onto rental prices is theoretically ambiguous. I estimate both price impacts in U.S. residential housing markets using data from a boom in real estate purchases by buyers from China, which amounted to $200 billion of purchases made between 2010 and 2019. Using a novel method to measure these purchases and an instrumental variable for where purchases are made, I find a large positive house price impact. Consistent with investment q-theory, rents fall as constructions rise, especially in areas with elastic housing supply.

We study racial disparities in the U.S. mortgage market. Using new data from Hurtado and Sakong (2024), we present three findings. First, we document access disparities between minority and otherwise-identical White borrowers even within the same bank and loan officer. In contrast, cost disparities are nearly zero. Second, the use of automated underwriting algorithms is associated with smaller access disparities but slightly larger cost disparities. Third, individual factors do not seem to matter much. Our findings represent another step toward understanding the factors driving discriminatory forces in the mortgage market. Recent research suggests structural or organizational factors may also play a role and have been overlooked by previous studies (Hurtado and Sakong, 2024).

Previous research has shown that some people voluntarily use commitment contracts that restrict their own choice sets. We study how people divide money between two accounts: a liquid account that permits unrestricted withdrawals and a commitment account that is randomly assigned in a between-subject design to have either a 10% early withdrawal penalty, or a 20% early withdrawal penalty, or not to allow early withdrawals at all (i.e., an infinite penalty). When the liquid account and the commitment account pay the same interest rate, higher early-withdrawal penalties attract more commitment account deposits. This pattern is predicted by the hypothesis that some participants are partially- or fully-sophisticated present-biased agents. Such agents perceive that higher penalties generate greater scope for commitment by disincentivizing (penalized) early withdrawals. The experiment also shows that when the commitment account pays a higher interest rate than the liquid account, the positive empirical slope relating penalties and commitment deposits is flattened, suggesting that naïve present-biased agents or agents with standard exponential discounting are also in our sample. Across all of our experimental treatments, higher early withdrawal penalties on the commitment account sometimes increase and never reduce allocations to the commitment account.

Media: The Atlantic, WSJ