Working Papers
Working Papers
 "Giving Up": The Impact of Decreasing Housing Affordability on Consumption, Work Effort, and Investment (with Seung Hyeong Lee)
Abstract: Housing affordability has declined sharply in recent decades, leading many younger generations to give up on homeownership. Using a calibrated life-cycle model matched to U.S. data, we project that the cohort born in the 1990s will reach retirement with a homeownership rate roughly 9.6 percentage points lower than that of their parents' generation. The model also shows that as households' perceived probability of attaining homeownership falls, they systematically shift their behavior: they consume more relative to their wealth, reduce work effort, and take on riskier investments. We show empirically that renters with relatively low wealth exhibit the same patterns. These responses compound over the life cycle, producing substantially greater wealth dispersion between those who retain hope of homeownership and those who give up. We propose a targeted subsidy that lifts the largest number of young renters above the "giving-up threshold." This policy yields welfare gains that are 3.2 times those of a uniform transfer and 10.3 times those of a transfer targeted to the bottom 10% of the wealth distribution, while also increasing homeownership rate, raising work effort, and reducing reliance on the social safety net.
Coverage: Financial Times, Fortune, Marginal Revolution, Realtor.com, Macro Roundup
Disagreement, Subjective Uncertainty, and the Stock Market (with Jingoo Kwon and Seung Hyeong Lee)
Abstract: We propose a method to separately quantify cross-sectional disagreement and subjective uncertainty at firm and fiscal quarter levels, and investigate how they jointly affect stock market volatility, returns, and trading volume. While disagreement and subjective uncertainty are often treated interchangeably in empirical research, we find that conflating the two may lead to misleading or even opposite results. Subjective uncertainty is positively correlated with volatility when disagreement is low, but this relationship reverses and the correlation becomes negative when disagreement is high. These results suggest the need for caution when using volatility as a proxy for agents' uncertainty, especially during periods of heightened disagreement. We also find that disagreement and subjective uncertainty have opposite yet interactive effects on returns and trading volume. Stocks with higher disagreement earn lower returns and exhibit higher trading volumes, with these effects amplified 2-3 times when subjective uncertainty is low. Conversely, stocks with higher subjective uncertainty earn higher returns and experience lower trading volumes, with these effects similarly amplified when disagreement is high. We provide a theoretical framework and perform numerical simulations to explain our empirical findings.
Households' Liquidity Management and Endogenous Sorting of Bank Depositor Types
Are Institutional Investors Sleeping on Yield? An Analysis of Inertia in Money Market Fund Choices (with Ali Hortacsu)
Youth Runs (with Luis Garicano)
Addiction Runs: Rank Competition and Strategic Complementarities in Prescription Stimulant Usage (with Chanwool Kim and Giyoung Kwon)
Relying on Unregulated Firms to Achieve Public Health Goals: Evidence from Pharmacies in Kenya (with Michael Dinerstein, Anne Karing, and Emma Yan)
Retail Drugstore Closures and the Declining Drug-Retail Complementarity (with Chanwool Kim)
Package Sizes and Unequal Burden of Inflation (with Chanwool Kim and Youngeun Lee)
Housing Tenure as an Investment Decision: Evidence from Survey and Field Experiments (with Chanwool Kim)
What Drives Gold Prices? (with Robert Barsky, Craig Epstein, and Adrian Lafont-Mueller)
Chicago Fed Letter, 464 (2021), 1-6.
Abstract: A half century after gold ceased to play a significant formal role in the international monetary system, it still captures a great deal of attention in the financial press and the popular imagination. Yet there has been very little scrutiny of the primary factors determining the price of gold since its dollar price was first allowed to vary freely in 1971. In this article, we attempt to fill in that gap by highlighting three considerations that are commonly cited as drivers of gold prices: inflationary expectations, real interest rates, and pessimism about future macroeconomic conditions.
Coverage: J.P. Morgan Center for Commodities