Research
Working papers:
What are the limits on how much can a government borrow when the real interest rate on public debt is below the growth rate of the economy? I explore this question using a standard model of risky investment under incomplete markets, extended to feature emerging market (EM) economies with even greater risk, and limits to the private supply of safe assets. These two elements further inflate the bubble in public debt, affording developed market (DM) governments even greater fiscal space.
How should governments calibrate the desire for redistribution via progressive taxation against the need to incentivise the accumulation of human capital? I explore this question in a heterogeneous agent model featuring stochastic human capital accumulation where agents choose an optimal number of years to study before starting work. The social welfare-maximising policy features generous subsidies for education and highly progressive labour taxes.
I show that a standard incomplete markets model with labour income risk alone, when modelled accurately using a new method, can broadly match the distribution of wealth observed in the US and UK. Moreover, I show that increased labour income inequality and risk can account for around a third of the rise in the concentration of wealth among the top 1% in the US since the 1970s.
Works in progress:
Betting the House: Entrepreneurial Investment using Housing as Collateral
I examine the role that housing plays as collateral in investment by credit-constrained entrepreneurs, who face uninsurable idiosyncratic and aggregate investment risk from their capital.