Risultati della ricerca
Creator: Chen, Daphne, Guvenen, Fatih, Kambourov, Gueorgui, Kuruscu, Burhanettin, and Ocampo, Sergio Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 764 Abstract:
How does wealth taxation differ from capital income taxation? When the return on investment is equal across individuals, a well-known result is that the two tax systems are equivalent. Motivated by recent empirical evidence documenting persistent heterogeneity in rates of return across individuals, we revisit this question. With such heterogeneity, the two tax systems have opposite implications for both efficiency and inequality. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the tax base, shifts the tax burden toward unproductive entrepreneurs, and raises the savings rate of productive ones. This reallocation increases aggregate productivity and output. In the simulated model parameterized to match the US data, replacing the capital income tax with a wealth tax in a revenue-neutral fashion delivers a significantly higher average lifetime utility to a newborn (about 7.5% in consumption-equivalent terms). Turning to optimal taxation, the optimal wealth tax (OWT) in a stationary equilibrium is positive and yields even larger welfare gains. In contrast, the optimal capital income tax (OCIT) is negative—a subsidy—and large, and it delivers lower welfare gains than the wealth tax. Furthermore, the subsidy policy increases consumption inequality, whereas the wealth tax reduces it slightly. We also consider an extension that models the transition path and find that individuals who are alive at the time of the policy change, on average, would incur large welfare losses if the new policy is OCIT but would experience large welfare gains if the new policy is an OWT. We conclude that wealth taxation has the potential to raise productivity while simultaneously reducing consumption inequality.
Parola chiave: Rate of return heterogeneity, Wealth inequality, Wealth taxation, Capital income tax, and Power law models Soggetto: E21 - Macroeconomics: Consumption; Saving; Wealth, E22 - Investment; Capital; Intangible Capital; Capacity, E62 - Fiscal Policy, and H21 - Taxation and Subsidies: Efficiency; Optimal Taxation
Creator: Boerma, Job and Karabarbounis, Loukas Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 763 Abstract:
During the past two decades, households experienced increases in their average wages and expenditures alongside with divergent trends in their wages, expenditures, and time allocation. We develop a model with incomplete asset markets and household heterogeneity in market and home technologies and preferences to account for these labor market trends and assess their welfare consequences. Using micro data on expenditures and time use, we identify the sources of heterogeneity across households, document how these sources have changed over time, and perform counterfactual analyses. Given the observed increase in leisure expenditures relative to leisure time and the complementarity of these inputs in leisure technology, we infer a significant increase in the average productivity of time spent on leisure. The increasing productivity of leisure time generates significant welfare gains for the average household and moderates negative welfare effects from the rising dispersion of expenditures and time allocation across households.
Parola chiave: Leisure productivity, Inequality, Consumption, and Time use Soggetto: J22 - Time Allocation and Labor Supply, D10 - Household Behavior: General, D60 - Welfare Economics: General, and E21 - Macroeconomics: Consumption; Saving; Wealth
Creator: Boerma, Job and Karabarbounis, Loukas Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 746 Abstract:
We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and home production. Accounting for home production amplifies welfare-based differences across households meaning that inequality is larger than we thought. Home production does not offset differences that originate in the market sector because productivity differences in the home sector are significant and the time input in home production does not covary with consumption expenditures and wages in the cross section of households. The optimal tax system should feature more progressivity taking into account home production.
Parola chiave: Labor supply, Home production, Inequality, and Consumption Soggetto: E21 - Macroeconomics: Consumption; Saving; Wealth, J22 - Time Allocation and Labor Supply, D60 - Welfare Economics: General, and D10 - Household Behavior: General
Creator: Chen, Peter, Karabarbounis, Loukas, and Neiman, Brent Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 736 Abstract:
The sectoral composition of global saving changed dramatically during the last three decades. Whereas in the early 1980s most of global investment was funded by household saving, nowadays nearly two-thirds of global investment is funded by corporate saving. This shift in the sectoral composition of saving was not accompanied by changes in the sectoral composition of investment, implying an improvement in the corporate net lending position. We characterize the behavior of corporate saving using both national income accounts and firm-level data and clarify its relationship with the global decline in labor share, the accumulation of corporate cash stocks, and the greater propensity for equity buybacks. We develop a general equilibrium model with product and capital market imperfections to explore quantitatively the determination of the flow of funds across sectors. Changes including declines in the real interest rate, the price of investment, and corporate income taxes generate increases in corporate profits and shifts in the supply of sectoral saving that are of similar magnitude to those observed in the data.
Parola chiave: Labor share, Cost of capital, Corporate saving, and Profits Soggetto: E25 - Aggregate Factor Income Distribution, G35 - Payout Policy, E21 - Macroeconomics: Consumption; Saving; Wealth, and G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Creator: Lepetyuk, Vadym and Stoltenberg, Christian Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 705 Abstract:
The rise in within-group consumption inequality in response to the increase in within-group income inequality over the last three decades in the U.S. is puzzling to expected-utility-based incomplete market models. The two-sided lack of commitment models exhibit too little consumption inequality while the standard incomplete markets models tend to predict too much consumption inequality. We show that a model with two-sided lack of commitment and chance attitudes, as emphasized by prospect theory, can explain the relationship and can avoid the systematic bias of the expected utility models. The chance attitudes, such as optimism and pessimism, imply that the households attribute a higher weight to high and low outcomes compared to their objective probabilities. For realistic values of risk aversion and of chance attitudes, the incentives for households to share the idiosyncratic risk decrease. The latter effect endogenously amplifies the increase in consumption inequality relative to the expected utility model, thereby improving the fit to the data.
Parola chiave: Risk sharing, Consumption inequality, Prospect theory, and Limited enforcement Soggetto: D52 - Incomplete Markets, D31 - Personal Income, Wealth, and Their Distributions, and E21 - Macroeconomics: Consumption; Saving; Wealth
Creator: Glover, Andrew, Heathcote, Jonathan, Krueger, Dirk, and Ríos-Rull, José-Víctor Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 684 Abstract:
In this paper we construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of severe recessions are distributed across different household age groups. The model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages, as observed in the data. Asset price declines hurt the old, who rely on asset sales to finance consumption, but benefit the young, who purchase assets at depressed prices. In our preferred calibration, asset prices decline more than twice as much as wages, consistent with the experience of the US economy in the Great Recession. A model recession is approximately welfare-neutral for households in the 20–29 age group, but translates into a large welfare loss of around 10% of lifetime consumption for households aged 70 and over.
Parola chiave: Asset prices, Recessions, Aggregate risk, and Overlapping generations Soggetto: D58 - Computable and Other Applied General Equilibrium Models, D31 - Personal Income, Wealth, and Their Distributions, E21 - Macroeconomics: Consumption; Saving; Wealth, and D91 - Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
Creator: Mehra, Rajnish, Piguillem, Facundo, and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 655 Abstract:
There is a large amount of intermediated borrowing and lending between households. Some of it is intergenerational, but most is between older households. The average difference in borrowing and lending rates is over 2 percent. In this paper, we develop a model economy that displays these facts and matches not only the returns on assets but also their quantities. The heterogeneity giving rise to borrowing and lending and differences in equity holdings depends on differences in the strength of the bequest motive. In equilibrium, the lenders are annuity holders and the borrowers are those who have equity holdings, who live off its income when retired, and who leave a bequest. The borrowing rate and return on equity are the same in the absence of aggregate uncertainty. The divergence between borrowing and lending rates can thus give rise to an equity premium, even in a world without aggregate uncertainty.
Parola chiave: Retirement, Equity premium, Government debt, Borrowing, Aggregate intermediation, Life cycle savings, and Lending Soggetto: H62 - National Deficit; Surplus, G23 - Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors, G11 - Portfolio Choice; Investment Decisions, D31 - Personal Income, Wealth, and Their Distributions, E21 - Macroeconomics: Consumption; Saving; Wealth, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, E20 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data), E44 - Financial Markets and the Macroeconomy, H00 - Public Economics: General, and G10 - General Financial Markets: General (includes Measurement and Data)
Creator: Yang, Fang Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 638 Abstract:
This paper studies a quantitative dynamic general equilibrium life-cycle model where parents and their children are linked by bequests, both voluntary and accidental, and by the transmission of earnings ability. This model is able to match very well the empirical observation that households with similar lifetime incomes hold very different amounts of wealth at retirement. Income heterogeneity and borrowing constraints are essential in generating the variation in retirement wealth among low lifetime income households, while the existence of intergenerational links is crucial in explaining the heterogeneity in retirement wealth among high lifetime income households.
Soggetto: E21 - Macroeconomics: Consumption; Saving; Wealth
Creator: Yang, Fang Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 635 Abstract:
Micro data over the life cycle shows two different patterns of consumption of housing and non-housing goods: the consumption profile of non-housing goods is hump-shaped while the consumption profile for housing first increases monotonically and then flattens out. These patterns hold true at each consumption quartile. This paper develops a quantitative, dynamic general equilibrium model of life cycle behavior, which generates consumption profiles consistent with the observed data. Borrowing constraints are essential in explaining the accumulation of housing assets early in life, while transaction costs are crucial in generating the slow downsizing of the housing assets later in life. The bequest motives play a role in determining total life time wealth, but not the housing profile.
Parola chiave: Life cycle, Housing, Consumption, and Distribution Soggetto: J14 - Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination, E21 - Macroeconomics: Consumption; Saving; Wealth, and R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand