Macroeconomics and Racial Inequality
Paper Session
Friday, Jan. 3, 2025 8:00 AM - 10:00 AM (PST)
- Chair: Jamein P. Cunningham, University of Texas-Austin
Student Loan Repayment and Wealth Outcomes: A Threshold Quantile Approach
Abstract
With federal student loan debt reaching $1.7 trillion in 2024 and repayment rates declining significantly over the past decade, understanding how student debt repayment affects household wealth accumulation has become increasingly critical. While previous research has focused primarily on the impact of student debt balances, this paper examines how evolving repayment dynamics—shaped by income-driven repayment plans and extended repayment terms—affect household wealth outcomes across the wealth distribution. Using data from the Survey of Consumer Finances (2013-2022), we employ quantile regression and bent line quantile regression techniques to analyze how monthly payment-to-income ratios (PIR) affect various wealth outcomes, including net worth excluding student debt, financial assets, nonfinancial assets, and other types of debt. Our findings reveal significant heterogeneity and nonlinearities in these relationships across the wealth distribution. While student debt repayment shows no significant association with adjusted net worth, lower repayment is consistently associated with higher nonfinancial asset accumulation for households at all percentiles of the wealth distribution. Furthermore, our bent-line quantile regression results identify critical thresholds in these relationships, with effects being particularly stronger below these thresholds. For instance, a one percentage point decrease in PIR below the threshold is associated with up to a 6.9% increase in nonfinancial assets. These findings are particularly relevant given the dramatic decline in student loan repayment rates and the growing prevalence of extended repayment terms, suggesting that policies affecting repayment burdens could significantly impact household wealth accumulation patterns.Does Sovereignty Help Economic Growth?
Abstract
Satellite economies are characterized by inter alia institutional constraints imposed by a larger sovereign state. Such constraints may distort the trade potential of such economies. We insert these considerations into a theoretical gravity model. Such model was estimated with a Poisson pseudo-maximum likelihood panel regressions (PPML) with high-dimensional fixed effects that is robust to heteroskedasticity, singletons, and zero trade issues. Our PPML considers multilateral resistance terms and clusters standard errors. We identify most of the current satellite economies and show that trade patterns are lower for these set of economies. These outcomes are obtained when a dummy variable recognizes satellite economies in the whole dataset and when segmented regressions with and without satellite economies are compared. Our approach contrasts with much of the existing literature, which estimates the trade patterns of former colonies with regressions that are not robust to singletons, exhibiting inter alia misspecification issues. We argue that institutional constraints unique to them play a key role in explaining forgone gains from trade. We contend that trade dynamics of former colonies may not predicted the current trade of contemporary colonies: Changes in the global context and different institutional arrangements between current colonies vis-à-vis previous colonies may interact as modifying factors for trade patterns.Credit Expansion and Job Displacement
Abstract
This paper explores the effects of bank deregulation on individuals’ decisions re- garding marriage. Bank deregulation serves as a vehicle for enhancing liquidity, which plays a critical role in managing financial risks. Likewise, marriage often serves as a mechanism for sharing risks between partners. We pose the question of whether the relaxation of liquidity constraints brought about by deregulation diminishes the risk-sharing aspect of marriage, subsequently reducing the likelihood of people getting married in states that have undergone deregulation. Leveraging the phased implementation of bank branch deregulation, we employ a difference-in-difference methodology to gauge the impact on the probability of marriage. Our findings reveal a decrease in the likelihood of marriage resulting from the deregulation of bank branches. Notably, these effects hold statistical significance across various demographic groups, including gender, race, and income. These outcomes align with the notion that heightened local competition in credit markets bolsters local liquidity, reducing the reliance on marriage as a means of mitigating financial risks.Balancing Equity and Economic Growth: The Federal Job Guarantee's Impact on Income Inequality and Business Competitiveness
Abstract
This paper expands on the benefits of the Federal Job Guarantee (FDG) and offers an exploration for financing the program (Paul, et Al., 2018). The FJG is a program that supplies a tangible and sustainable solution to break the cycle of long-term poverty in America by providing quality employment options for all, especially for the most financially vulnerable members of our society (Paul, et al., 2017, 2018) (Tcherneva, 2005, 2018). The program has three benefits. First, it creates a counter-cyclical stabilizer that could smooth severe economic downturns (Palley, 2018) (Tcherneva, 2017), Second, it generates a skillful and competitive labor force due to active investment in skills development (Paul, et al, 2018) (Dunn, 2018), and third, it serves as a price floor for wages in the labor market (Paul, et Al., 2017). An efficient labor market creates a more efficient and productive business environment (Deming, 2017). In short, the FJG, if implemented conscientiously, efficiently, and strategically, could moderate economic downswings and ignite social equity, thereby contributing to a more productive and competitive labor force in support of business growth. Additionally, the COVID-19 Pandemic offered an opportunity to re-evaluate our policy tools to soften the business cycle swings (Hensher, 2020). The FJG can provide the safety net for the millions of people who have been left without employment during this crisis (Tcherneva, 2019, 2020). The FJG offers tangible and sensitive solutions for many Americans.Discussant(s)
Gerald E. Daniels Jr.
,
Howard University
Karl David Boulware
,
Wesleyan University
Ejindu Ume
,
University of Miami
Jose Caraballo-Cueto
,
University of Puerto Rico-Rio Piedras
Raul Moncarz
,
Florida International University
JEL Classifications
- N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
- E0 - General