Has the Increased Attachment of Women to the Labor Market Changed a Family's Ability to Smooth Income Shocks?

By Olga Gorbachev

American Economic Review, May 2016

An increase in a married woman's attachment to the labor market affected her family's ability to smooth unexpected income shocks. Between 1970 and 1990, the sharp rise in labor market attachment provided an increasingly important channel for smoothing sho...

Medicare Part D and Portfolio Choice

By Padmaja Ayyagari and Daifeng He

American Economic Review, May 2016

Economic theory suggests that medical spending risk affects the extent to which households are willing to accept financial risk, and consequently their investment portfolios. In this study, we focus on the elderly for whom medical spending represents a su...

On the Optimal Inflation Rate

By Markus K. Brunnermeier and Yuliy Sannikov

American Economic Review, May 2016

In our incomplete markets economy households choose portfolios consisting of risky (uninsurable) capital and money. Money is a bubble, it has positive value even though it yields no payoff. The market outcome is constrained Pareto inefficient due to a pec...

A Simple Model of Subprime Borrowers and Credit Growth

By Alejandro Justiniano, Giorgio E. Primiceri, and Andrea Tambalotti

American Economic Review, May 2016

The surge in credit and house prices that preceded the Great Recession was particularly pronounced in ZIP codes with a higher fraction of subprime borrowers (Mian and Sufi, 2009). We present a simple model with prime and subprime borrowers distributed acr...

Debt Constraints and the Labor Wedge

By Patrick Kehoe, Virgiliu Midrigan, and Elena Pastorino

American Economic Review, May 2016

Changes in household debt and employment across regions of the U.S. during the Great Recession are highly correlated: regions where the decrease in household debt was most pronounced were also regions where the decline in employment was most severe. We sh...

To Buy or Not to Buy: Consumer Constraints in the Housing Market

By Andreas Fuster and Basit Zafar

American Economic Review, May 2016

We use a strategic household survey to study the sensitivity of intended homeownership decisions to financing constraints. We find that the average stated likelihood of buying a home is strongly sensitive to the size of the required down payment, which we...

Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark

By Itzik Fadlon, Jessica Laird, and Torben Heien Nielsen

American Economic Journal: Applied Economics, July 2016

This paper studies how firms set contributions to employer provided 401(k)-type pension plans. Using a reform that decreased the subsidy to contributions to capital pension accounts for Danish workers in the top income tax bracket, we provide strong evide...

Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia

By Vivi Alatas, Abhijit Banerjee, Arun G. Chandrasekhar, Rema Hanna, and Benjamin A. Olken

American Economic Review, July 2016

We use unique data from over 600 Indonesian communities on what individuals know about the poverty status of others to study how network structure influences information aggregation. We develop a model of semi-Bayesian learning on networks, which we struc...

Interest Rates and Equity Extraction during the Housing Boom

By Neil Bhutta and Benjamin J. Keys

American Economic Review, July 2016

Credit record panel data from 1999-2010 indicates that the likelihood of home equity extraction (borrowing, on average, about $40,000 against one's home) peaked in 2003 when mortgage rates reached historic lows. We estimate a 27 percent rise in extraction...

The Effects of the Massachusetts Health Reform on Household Financial Distress

By Bhashkar Mazumder and Sarah Miller

American Economic Journal: Economic Policy, August 2016

In this paper, we examine the effect of a major health care reform in Massachusetts on a broad set of financial outcomes using credit report data. We exploit variation in the impact of the reform across counties and age groups using pre-reform insurance c...

The Realization Effect: Risk-Taking after Realized versus Paper Losses

By Alex Imas

American Economic Review, August 2016

Understanding how prior outcomes affect risk attitudes is critical for the study of choice under uncertainty. A large literature documents the significant influence of prior losses on risk attitudes. The findings appear contradictory: some studies find gr...

Macroeconomic Effects of Bankruptcy and Foreclosure Policies

By Kurt Mitman

American Economic Review, August 2016

I study the implications of two major debt-relief policies in the United States: the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the Home Affordable Refinance Program (HARP). To do so, I develop a model of housing and default that...

Capital Taxation under Political Constraints

By Florian Scheuer and Alexander Wolitzky

American Economic Review, August 2016

This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough coalition of citizens supports reform; thus, sustainable policies are those that will continue to attract enough politi...

Runs on Money Market Mutual Funds

By Lawrence Schmidt, Allan Timmermann, and Russ Wermers

American Economic Review, September 2016

We study daily money market mutual fund flows at the individual share class level during September 2008. This fine granularity of data allows new insights into investor and portfolio holding characteristics conducive to run risk in cash-like asset pools. ...

What Does Debt Relief Do for Development? Evidence from India's Bailout for Rural Households

By Martin Kanz

American Economic Journal: Applied Economics, October 2016

This paper studies the impact of debt relief, using a natural experiment arising from India's "Agricultural Debt Waiver and Debt Relief Scheme," one of the largest household-level debt relief initiatives in history. I find that debt relief has a substanti...

The Impact of High School Financial Education: Evidence from a Large-Scale Evaluation in Brazil

By Miriam Bruhn, Luciana de Souza Leão, Arianna Legovini, Rogelio Marchetti, and Bilal Zia

American Economic Journal: Applied Economics, October 2016

We study the impact of a comprehensive high school financial education program spanning 6 states, 892 schools, and approximately 25,000 students in Brazil through a randomized control trial. The program increased student financial proficiency by a quarter...

Debt Portfolios and Homestead Exemptions

By Thomas Hintermaier and Winfried Koeniger

American Economic Journal: Macroeconomics, October 2016

This paper investigates the economic relevance of the large differences in homestead exemptions across US states. We build a structural model for an equilibrium analysis of debt-portfolio choices over the life cycle. Our analysis captures key patterns fro...

Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions

By Day Manoli and Andrea Weber

American Economic Journal: Economic Policy, November 2016

This paper presents new evidence on the effects of retirement benefits on labor force participation decisions. The analysis is based on a mandated rule for employer-provided retirement benefits in Austria that creates discontinuities in the incentives for...