Research

• A Scrooge McDuck Theory of Wealth Dynamics

Peter Sinclair Prize (Joint 1st Place) – MMF PhD Conference 2025 

This paper introduces insatiable utility from wealth to jointly explain the rise in the wealth-to-output ratio, investment stagnation, and increasing wealth inequality in advanced economies. These preferences induce an upper bound on optimal consumption, which binds asymptotically for high-income agents. Labelled Scrooge McDuck, they hold a portion of their wealth purely for its own sake, with all returns reinvested. This pushes asset prices above fundamental value. A uniquely determined rational bubble exists, which crowds out investment and grows at a rate that exceeds that of the economy. Its price co-moves with income and wealth inequality, all three diverging over time. Any wealth tax prevents these divergent dynamics, which persist under low capital income taxes, thereby breaking the standard equivalence between the two tax types.

• Rational Bubbles and Productivity Shocks: Theoretical Insights for Ecological Transition

This paper investigates how negative productivity shocks influence the valuation of rational bubbles within an OLG framework. Two channels are identified: i) a productivity decline reduces output, potentially lowering savings and bubble demand, and ii) by decreasing the rate of return, it reduces bubble growth rate, enabling a higher valuation. Overall, a negative productivity shock will lead to a lower bubble valuation when the substitution effect dominates the income effect in agents' saving decisions. This framework is applied to ecological transition policies, which  constraints production and acts as negative productivity shocks. The potential decline in rational bubble valuation following their announcement is referred to as a stranded rational bubble. As in the stranded assets literature, this setting reveals a trade-off between implementing a fast transition and minimizing the extent of stranded bubbles.