Working Papers

Wealth Inequality, Estate Taxation, and the Intergenerational Return Rate Correlation (Job Market Paper)

In this paper, I investigate how the intergenerational correlation of return rates affects wealth inequality and estate tax reforms. I first empirically document that a 10-percentile rank increase in the father's return rate is associated with a 2.8-percentile rank increase in the child's return rate. Next, I develop a dynamic macroeconomic model incorporating intergenerational correlations of both earnings and return rates. Eliminating return rate correlation in the model reduces the top 5% wealth share by 5 percentage points and diminishes their wealth-to-earnings ratio by 27%. In contrast, eliminating the earnings correlation results in smaller effects, reducing the top 5% wealth share by 1 percentage point and increasing the wealth-to-earnings ratio by 2%. Both intergenerational correlations have minimal impact on wealth accumulation at the lower end of the distribution. Additionally, I find that overlooking return rate correlation underestimates the impact of estate tax reforms on inequality and aggregate wealth.

Health Inequality, Labor Market Frictions, and Lifetime Earnings Gap

This paper studies the contribution of health inequality in labor market frictions to lifetime earnings gap between healthy and unhealthy individuals. I empirically document that unhealthy individuals face lower job finding rates and higher involuntary job separation rates compared to their healthy counterparts. Then, I build up a life-cycle model where labor market frictions differ by health status. Model results show that eliminating health inequality in labor market frictions reduces the lifetime earnings gap by 8.59% at age 35 and by 2.66% at age 65. Decomposition exercises reveal that the job separation rate channel plays a larger role in explaining the gaps in employment rate, unemployment rate, and lifetime earnings, while the job finding rate channel contributes more to the labor force participation rate gap. In addition, removing health-based disadvantages in the job finding rate results in greater welfare improvements compared to addressing those in the job separation rate.

The Rental Housing Market and the Marginal Propensity to Consume: A Case of the Jeonse System in Korea

(in progress, with Keuncheol Lee)

In this paper, we investigate how the Jeonse system in Korea affects the marginal propensity to consume and fiscal policy multipliers by using a dynamic macroeconomic model with two types of assets and earnings uncertainty. In the Jeonse system, renters provide interest-free loans equal to around 70% of the property value (Jeonse deposits) to landlords in exchange for not paying rent for two years. We argue that the Jeonse system decreases the marginal propensity to consume of landlords by enhancing the liquidity of their properties, while it makes tenants more likely to live hand-to-mouth due to the Jeonse deposits. We conduct counterfactual experiments with different Jeonse deposit levels to examine the effects of the Jeonse system on the marginal propensity to consume, fiscal policy multipliers, and welfare. Our findings have implications for the joint design of rental housing markets and fiscal policy.