The Distribution of Household Debt in the United States, 1950-2022 (with Moritz Kuhn, Moritz Schularick and Ulrike I. Steins). Review of Economic Dynamics, 2025 (57), 101288.
Abstract: Using new household-level data, we study the secular increase in U.S. household debt and its distribution since 1950. Most of the debt were mortgages, which initially grew because more households borrowed. Yet after 1980, debt mostly grew because households borrowed more. We uncover home equity extraction, concentrated in the white middle class, as the largest cause, strongly affecting intergenerational inequality and life-cycle debt profiles. Remarkably, the additional debt did not lower households' net worth because of rising house prices. We conclude that asset-price-based borrowing became an integral part of households' consumption-saving decisions, yet at the cost of higher financial fragility.
It Takes Two to Borrow: The Effects of the Equal Credit Opportunity Act on Housing, Credit, and Labor Market Decisions of Married Couples. The Review of Financial Studies, 2022 (38), 155–193 .
awarded with the Reinhard Selten Award (Young Author Best Paper Award) 2021 of the Verein für Socialpolitik
Abstract: Until the 1970s, U.S. mortgage lenders commonly discounted half of the wife’s income in couples’ joint mortgage applications. This changed with the introduction of antidiscrimination legislation in the 1970s, providing a natural experiment to study the relaxation of income-related borrowing constraints. I study the effects of the reform by estimating difference-in-differences regressions and solving a simple calibrated life cycle model. I find substantial positive effects of the reform on mortgage borrowing and homeownership rates of married couples with working wives. Moreover, I find a positive effect on married womens' labor force participation, which strongly amplifies the homeownership and borrowing effects.
Monetary Policy and Racial Inequality (with Moritz Kuhn, Moritz Schularick and Paul Wachtel). Brookings Papers on Economic Activity, 2022 , 1-63 .
Abstract: This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own less financial assets that appreciate in value. Over multi-year time horizons, the employment effects are substantially smaller than the countervailing portfolio effects. We conclude that there is little reason to think that accommodative monetary policy plays a significant role in reducing racial inequities in the way often discussed. On the contrary, it may well accentuate inequalities for extended periods.
Social Capital and the Spread of COVID-19: Insights from European Countries (with Sebastian Seitz, Sebastian Siegloch, Michaela Slotwinski and Nils Wehrhöfer). Journal of Health Economics, 2021 (80), 102531.
previous version in Covid Economics, Vetted and Real-Time Papers, Issue 26.
media: VoxEU; in German: Ökonomenstimme, FAZ
CEPR Working Paper version
Abstract: We investigate the effect of social capital on health outcomes during the Covid-19 pandemic in independent analyses for Austria, Germany, Great Britain, Italy, the Netherlands, Sweden and Switzerland. Exploiting detailed geographical variation within countries, we show that a one-standard-deviation increase in social capital leads to between 14% and 34% fewer Covid-19 cases per capita accumulated from mid-March until end of June 2020, as well as between 6% and 35% fewer excess deaths per capita. Our results highlight the positive health returns of strengthening social capital.
The College Wealth Divide: Education and Inequality in America, 1956-2016 (with Moritz Kuhn and Moritz Schularick). Federal Reserve Bank of St. Louis Review, 2020 (1), 19-49.
summary article (Federal Reserve Bank of St. Louis Economic Synopses)
Abstract: Using new long-run microdata, this article studies wealth and income trends of households with a college degree (college households) and without a college degree (noncollege households) in the United States since 1956. We document the emergence of a substantial college wealth premium since the 1980s, which is considerably larger than the college income premium. Over the past four decades, the wealth of college households has tripled. By contrast, the wealth of noncollege households has barely grown in real terms over the same period. Part of the rising wealth gap can be traced back to systematic portfolio differences between college and noncollege households that give rise to different exposures to asset price changes. Noncollege households have lower exposure to the equity market and have profited much less from the recent surge in the stock market. We also discuss the importance of financial literacy and business ownership for the increase in wealth inequality between college and noncollege households.
Early pension withdrawals and optimal liquidity (with Henrik Yde Andersen, Patrick Moran and Søren Leth-Petersen).
Abstract: In most countries, retirement wealth is relatively illiquid due to early withdrawal penalties. Policymakers face a trade-off between flexibility and commitment, yet there is no consensus on the optimal solution. Exploiting administrative data and a natural experiment from Denmark, we document how individuals react to an exogenous reduction in the early withdrawal penalty. Moreover, we show how individuals use early pension withdrawals to smooth out the financial consequences of negative life events like unemployment. While the empirical results confirm the benefits of flexibility after negative life events, they also suggest that individuals may be tempted to spend instead of saving for retirement if the penalty is too low. We use a life-cycle model to give a structural interpretation to the data and evaluate alternative policies to optimally balance the trade-off between flexibility and commitment. Our preliminary results suggest that a policy conditioning the penalty level on the occurrence of negative life events would lead to substantial welfare gains.
Causal effects of interest rate expectations on firm decisions and their macroeconomic implications (with Georg Duernecker, Johannes Goensch and Nils Wehrhöfer).
Abstract: We study firms' financial and real decisions after an exogenous change in their interest rate expectations induced by a survey experiment. Firms revise their expectations downward after learning about the European Central Bank's policy rate. Moreover, we find a reduction in interest rate uncertainty. We link the survey to credit register data and find that treated firms both increase their loan amounts and shift their loan structure toward longer-term, fixed-rate credit with lower interest rates. Using balance sheet data, we also show that treated firms invest more following the RCT. These effects are driven by small firms. We are currently working on a quantitative model to study the aggregate effects of firms' expectation errors.
Spillover effects between pension and non-pension investments (with Katja Mann).
Disability insurance: fiscal goals and individual well-being (with Sonia Bhalotra, Thomas H. Jørgensen, Mathias F. Jensen, Sebastian Seitz and Franziska Valder)
Inequality and Savings (with Henrik Yde Andersen, Thomas Krause and Andreas Kuchler). Danmarks Nationalbank Memo.
Abstract: This memo provides three insights about the impact of demographic shifts and income inequality on the evolution of savings rates in Denmark, and compares with evidence from the US. The US experienced a large rise in savings, because high-income households tend to save large parts of their incomes, and top income shares increased sharply since the 1980s. At the same time, demographic changes altered the distribution of incomes across age groups. In our analysis of Danish data, we first show that income shares of high-income and middle-aged households have followed similar increasing trends in Denmark as in the US, albeit income inequality is much lower in Denmark. Second, median savings rates in Denmark exhibit similar patterns over the life cycle and along the income distribution as in the US. Third, we document important changes in savings behaviour over time. In particular, we find that savings rates increased markedly after the financial crisis for working-age households. We show that this is mainly due to a sharp deleveraging after the financial crisis. Overall, our results imply that changes in savings behavior play an important role when assessing the evolution of aggregate savings, beyond changes in income inequality and demographics.