Research

Does marital status affect households' investment choices? Is accounting for distinct family types necessary for the correct evaluation of policies that aim at stimulating housing demand? To answer these questions, I develop a life-cycle model of housing and financial portfolio choice with dynamic and heterogeneous family types. I find that divorce risk encourages precautionary savings of couples in the form of liquid assets and reduces their demand for illiquid housing. Expected marriage, low income levels and larger exposure to income fluctuations prevent singles from becoming homeowners. Abstracting from distinct family types amplifies the attractiveness of housing and, as a result, overstates the effectiveness of housing policies such as lowering property taxes and reducing transaction costs by a factor greater than two. This mis-specification is largest for young households who are most likely to be single and whose marital transition risk is highest. In contrast, regulations that facilitate stock market participation help to foster wealth accumulation, because they encourage investment in high return assets that are cheaper to liquidate in the event of a (marital or labor income) shock.   

Governments have a long history of imposing minimum equity requirements on new corporations. While opponents argue that capital requirements pose a detrimental barrier to entry, proponents maintain that they protect stakeholders from financially unviable entrepreneurship. Despite this controversy, there is little evidence to inform policymakers. We use a Norwegian reform and comprehensive data on entrepreneurs and their firms to study this quantity-quality trade-off. Reducing the capital requirement by 70\% nearly doubled entrepreneurial entry, without affecting survival rates, profitability, productivity, or financial leverage. We further find no evidence that new entrepreneurs differ in terms of ex-ante income, liquidity, or ability measures. Our findings thus indicate that capital requirements restrict entrepreneurship without screening on quality, which has policy implications for the many countries debating these requirements. More broadly, our model and data indicate that returns-to-scale  heterogeneity, rather than liquidity or productivity differences, is critical in modeling entry responses to regulation.