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 regulating entrepreneurs' use of limited liability by mandating a minimum amount of paid-in equity. While opponents argue that these requirements pose an unnecessary barrier to entrepreneurship, proponents maintain that they protect stakeholders, in part by screening out low-quality entrepreneurship. We exploit a 2012 Norwegian reform that lowered the capital requirement from $17,000 to $5,000 to study this quantity-quality trade-off. Our setting includes detailed data on both firms and the underlying entrepreneurs, providing comprehensive proxies for entrepreneurial quality. We first show that incorporation rates double after the reform and remain elevated over time. Post-reform entrants are considerably smaller in terms of assets and revenues but do not differ in terms of growth, survival rates, profitability, productivity, or leverage. Furthermore, post-reform entrants have similar past income levels, age, and educational attainment as pre-reform entrants. We further find no difference in educational achievement, captured by proxies for quantitative skills, communication skills, physical ability, and illicit traits. Thus, while the reform led to an influx of smaller firms, there is no indication that new entrepreneurs or their firms were riskier or of lower quality. These findings challenge the existing motivation for capital requirements. In explaining the mechanism behind the increase in entry, we find no evidence that the reform alleviated financial constraints. Rather, our empirical findings and enriched entry model suggest that returns-to-scale heterogeneity plays an important role. Optimally small entrepreneurs have more concave production functions and only enter when capital requirements are low.

We study intra-household insurance through spousal labor supply across countries with widely varying income levels. Empirically, we use new harmonized microdata from quarterly rotating-panel labor-force surveys in 35 countries to investigate how wives’ labor market transitions co-move with their husbands’ labor market outcomes. On average, poorer countries are characterized by both a larger “added worker effect” (employment entry upon spousal job loss) and “subtracted worker effect” (dropping out of employment when the husband finds a job). We interpret these patterns through the lens of a life-cycle model with two-member households, frictional formal labor markets and self-employment, as well as endogenous human capital and asset accumulation. While lower income levels and less developed asset markets can account for a higher added worker effect in poorer countries, stricter gender norms are needed to also replicate the larger subtracted worker effect.