MAJOR UPDATE!!!
Equilibrium Evictions
(with Dean Corbae and Michael Nattinger)
Submitted
We develop an equilibrium search and matching model of rental housing markets in low-income neighborhoods. Two-sided lack of commitment leads to inefficient evictions – the destruction of positive surplus matches – even with arbitrarily flexible rent contracts. Low-income tenants cannot pay rent upon job loss, while landlords continue to incur operating costs. Landlords choose to evict a non-paying tenant unless they can cover expected losses by raising rent upon re-employment, but tenants may either be unwilling to pay higher rent (since they can search for a new rental) or unable to afford it. Lower match surplus in the competitive equilibrium leads to lower quantity and quality of rental housing relative to the social-surplus-maximizing allocation. Policies that reduce evictions may raise or lower welfare, depending on their effect on supply. Permanent eviction restrictions reduce supply, while rent support can effectively eliminate evictions while raising supply even without replacing 100% of missed rent. Rent support may even be Pareto improving due to housing externalities. Unanticipated eviction restrictions, such as in response to the Covid-19 pandemic, raise welfare as long as they are temporary.
Equilibrium Evictions
(with Dean Corbae and Michael Nattinger)
Submitted
We develop an equilibrium search and matching model of rental housing markets in low-income neighborhoods. Two-sided lack of commitment leads to inefficient evictions – the destruction of positive surplus matches – even with arbitrarily flexible rent contracts. Low-income tenants cannot pay rent upon job loss, while landlords continue to incur operating costs. Landlords choose to evict a non-paying tenant unless they can cover expected losses by raising rent upon re-employment, but tenants may either be unwilling to pay higher rent (since they can search for a new rental) or unable to afford it. Lower match surplus in the competitive equilibrium leads to lower quantity and quality of rental housing relative to the social-surplus-maximizing allocation. Policies that reduce evictions may raise or lower welfare, depending on their effect on supply. Permanent eviction restrictions reduce supply, while rent support can effectively eliminate evictions while raising supply even without replacing 100% of missed rent. Rent support may even be Pareto improving due to housing externalities. Unanticipated eviction restrictions, such as in response to the Covid-19 pandemic, raise welfare as long as they are temporary.
Should I Stay or Should I Go?
(with José Mustre-del-Río)
In the late 1990s, nearly 7 percent of young college graduates moved across state lines every year. These workers enjoyed 30 percent higher earnings three years after moving relative to similar stayers, but their gains were not immediate, amounting to only 7 percent in the first year post-move. By the mid-2010s, mobility fell by more than half, and average earnings gains among movers fell and became more front-loaded. At the same time, debt increased among all young college graduates. We propose a model of geographic mobility with incomplete markets, where moving to a new state can deliver earnings gains that are either front- or back-loaded. Incomplete markets and high interest rates on debt reduce workers’ acceptance of back-loaded opportunities, even if they have the same present discounted increase in earnings as front-loaded opportunities. We find that lower potential gains account for most of the decline in mobility across periods, but that the lower initial wealth of young college graduates also reduced their mobility. The wealth effect on mobility is especially strong for poor individuals, so wealth changes generate an endogenous increase in income inequality later in the life cycle.
New Policy Work!
Why Haven’t Recent Rate Increases Slowed the Economy More? Look to Unusually Low Private-Lending Spreads
(with Johnson Oliyide)
Why Haven’t Recent Rate Increases Slowed the Economy More? Look to Unusually Low Private-Lending Spreads
(with Johnson Oliyide)
Profits, Markups, and Inflation:
Coauthors and I have recently been working to understand the current and historical contribution of profits/markups to inflation. This research has been published through the Federal Reserve Bank of Kansas City's Economic Review and Economic Bulletin and has been covered by national and regional media, including NPR's Planet Money.
1. How Much Have Record Corporate Profits Contributed to Recent Inflation? (with José Mustre-del-Río and Alice von Ende-Becker) with estimates of 2022 markup growth here.
2. Corporate Profits Contributed a Lot to Inflation in 2021 but Little in 2022 -- A Pattern Seen in Past Economic Recoveries (with José Mustre-del-Río and Jalen Nichols)
Coauthors and I have recently been working to understand the current and historical contribution of profits/markups to inflation. This research has been published through the Federal Reserve Bank of Kansas City's Economic Review and Economic Bulletin and has been covered by national and regional media, including NPR's Planet Money.
1. How Much Have Record Corporate Profits Contributed to Recent Inflation? (with José Mustre-del-Río and Alice von Ende-Becker) with estimates of 2022 markup growth here.
2. Corporate Profits Contributed a Lot to Inflation in 2021 but Little in 2022 -- A Pattern Seen in Past Economic Recoveries (with José Mustre-del-Río and Jalen Nichols)
COVID-19:
Health vs. Wealth: On The Distributional Effects of Controlling a Pandemic
with Jonathan Heathcote, Dirk Krueger, and Jose Victor Rios-Rull
Journal of Monetary Economics, Nov. 2023
FRB KC WP, NBER WP 27046, CEPR COVID Economics Version
Media coverage: NY Times, Bloomberg, Reuters
Summaries: VOX-EU, Minneapolis Fed
Slides: Virtual Brown Bag
with Jonathan Heathcote, Dirk Krueger, and Jose Victor Rios-Rull
Journal of Monetary Economics, Nov. 2023
FRB KC WP, NBER WP 27046, CEPR COVID Economics Version
Media coverage: NY Times, Bloomberg, Reuters
Summaries: VOX-EU, Minneapolis Fed
Slides: Virtual Brown Bag
Optimal Age-Based Vaccination and Economic Mitigation Policies for the Second Phase of the Covid-19 Pandemic
with Jonathan Heathcote and Dirk Krueger
Journal of Economic Dynamics and Control, July 2022
with Jonathan Heathcote and Dirk Krueger
Journal of Economic Dynamics and Control, July 2022
Growth and Business Cycles:
Aggregate Effects of Minimum Wage Regulation at the Zero Lower Bound
Journal of Monetary Economics, Nov 2019
SSRN CODE
Journal of Monetary Economics, Nov 2019
SSRN CODE
Intergenerational Redistribution in the Great Recession
(with Jonathan Heathcote, Dirk Krueger, and Jose Victor Rios Rull)
NBER, SSRN
Journal of Political Economy, Oct 2021.
(with Jonathan Heathcote, Dirk Krueger, and Jose Victor Rios Rull)
NBER, SSRN
Journal of Political Economy, Oct 2021.
Uninsurable Income Risk and the Welfare Effects of Reducing Global Imbalances
European Economic Review, Oct. 2025
(with Ayse Dur and Jacek Rothert)
European Economic Review, Oct. 2025
(with Ayse Dur and Jacek Rothert)
Inflation Expectations Limit the Power of Negative Interest Rates
(with Emily Pollard)
Federal Reserve Bank of Kansas City Economic Bulletin, March 2020
(with Emily Pollard)
Federal Reserve Bank of Kansas City Economic Bulletin, March 2020
KC Fed LMCI Implies the Labor Market Is Closer to a Full Recovery than the Unemployment Rate Alone Suggests
(with José Mustre-del-Río and Emily Pollard)
(with José Mustre-del-Río and Emily Pollard)
KC Fed LMCI Suggests Recent Inflation Is Not Due to the Tight Labor Market
(with José Mustre-del-Río and Emily Pollard)
(with José Mustre-del-Río and Emily Pollard)
Consumer Credit:
Employer Credit Checks: Poverty Traps versus Matching Efficiency
(with Dean Corbae)
NBER WP 25005
Accepted, Review of Economic Studies
(with Dean Corbae)
NBER WP 25005
Accepted, Review of Economic Studies
The Unintended Consequences of Employer Credit Check Bans in Labor Markets
with Kristle Cortés and Murat Tasci
Review of Economics and Statistics, Forthcoming
Online Appendix
FRB KC WP, Opportunity & Inclusive Growth WP, SSRN, LEHD SCRIPT, Compiled Laws
Previously titled "The Unintended Consequences of Employer Credit Check Bans in Labor and Credit Markets".
with Kristle Cortés and Murat Tasci
Review of Economics and Statistics, Forthcoming
Online Appendix
FRB KC WP, Opportunity & Inclusive Growth WP, SSRN, LEHD SCRIPT, Compiled Laws
Previously titled "The Unintended Consequences of Employer Credit Check Bans in Labor and Credit Markets".
Labor's Share of Income:
Demographic Origins of the Decline in Labor's Share
with Jacob Short
Submitted
(Previously circulated as "The Life-Cycle Distribution of Earnings and Decline in Labor's Share")
with Jacob Short
Submitted
(Previously circulated as "The Life-Cycle Distribution of Earnings and Decline in Labor's Share")
Can Capital Deepening Explain the Global Decline in Labor's Share?
with Jacob Short
SSRN
Review of Economic Dynamics, Jan 2020
with Jacob Short
SSRN
Review of Economic Dynamics, Jan 2020
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Descriptive Statistical Research:
Facts on the Distributions of Earnings, Income, and Wealth in the United States: 2007 Update
(with Javier Díaz-Giménez and Victor Ríos-Rull) Federal Reserve Bank of Minneapolis Quarterly Review Vol. 34, No. 1, February 2011, pp. 2–31 Entrepreneurship
Puzzlingly Divergent Trends in Household Wealth and Business Formation
(with Justin Barnette) Federal Reserve Bank of Kansas City Economic Review, 2021 Q2, pp. 5-16 Bankruptcy, Incorporation, and The Nature of Entrepreneurial Risk
(joint with Jake Short) *New Draft Coming Soon* |
