Working Papers

“Racial Differences in Consumption and Saving Behavior” [Link]

Abstract

The racial wealth gap is large. An explanation for the persistence of this gap is that people spend their resources differently. Estimating the marginal propensity to consume (MPC) by race is crucial in understanding the wealth gap. I draw on survey data I collected to estimate MPCs by race. MPCs are considerably higher among black than white respondents, even after adjusting for characteristics such as age, education, and income. In the Consumer Expenditure Survey, black households consume a higher share of visible goods out of overall consumption to signal status than white households. However, black consumers have more of a need to signal status to compensate for perceptions of them having lower incomes. To match these facts, I introduce status compensation motives into a standard life-cycle model and show that this mechanism can account for 36% of the racial difference in MPCs. Models that include racial heterogeneity in earnings volatility, unemployment shocks, and expenses, but exclude status motives, do not match the data showing that black people’s spending on visible goods increases with wealth. I use my model to show how understanding status spending motives can be used to address the racial wealth gap by estimating the size of a new policy to eliminate racial differences in wealth.

“Policy Environments and Household Inflation Expectations,” with Zhiyong Fan and Xuguang Simon Sheng [Link]

Abstract

We study how policy environments shape household inflation expectations and responses to information. Because households base consumption and saving decisions on expected inflation, misperceptions can distort intertemporal consumption choices. Using the first national survey of inflation expectations in China, combined with randomized information treatments and spatial variation in COVID-19 lockdown policies, we show that identical signals are processed differently across policy regimes. Households under lockdown respond more strongly to domestic policy communication, particularly official inflation targets, whereas households not in lockdown react more to adverse macroeconomic and pandemic news. Counterfactual exercises reveal asymmetric belief adjustments: entering lockdown leads to large upward revisions in inflation expectations, while exiting lockdown generates smaller downward revisions. We rationalize these patterns with a model of Bayesian updating with endogenous attention, in which lockdown status affects prior precision and the welfare cost of belief errors. The results demonstrate that policy regimes alter expectation formation by changing the effective precision and relevance of information.

“Monetary Policy Transmission to Consumption: Inequalities by Gender and Race” [Levy Working Paper] [SSRN] (Reject&Resubmit European Economic Review)

Abstract

This paper estimates the causal effects of monetary policy shocks on household consumption, with additional analysis of labor market and income responses, disaggregated by gender and race. I find that contractionary monetary policy reduces consumption more for black than white households, with the largest declines among households headed by black women. These gaps persist after accounting for differences in household education, debt, and income, but are partly explained by differences in marital status and spousal insurance against shocks. These shocks also lead households to shift expenditures from non-essential and durable goods toward essential non-durable goods and services. The analysis provides estimates of marginal propensities to consume across groups and shows that contractionary, rather than expansionary, shocks drive aggregate consumption responses. These findings highlight the importance of accounting for intersectional demographic heterogeneity in evaluating the distributional effects of monetary policy.

“The Conversion Penalty from Capabilities to Equivalent Livelihood Outcomes,” with Ruth Badru (Conditionally accepted in Review of Political Economy)

“Universal Long-Term Care Reform and Caregivers’ Labor Supply: Evidence from Korea,” with Selin Seçil Akın, Sung Ah Bahk, Lídia Brun, Ignacio González [SSRN] (under review)

Abstract

This study investigates the impact of Korea's universal long-term care insurance (LTCI) system, implemented in 2008, on the labor market outcomes of family caregivers. We exploit multiple discontinuities in the LTCI benefit structure to estimate the benefits' effect on caregiver employment. Analyzing data from a nationally representative survey, we find that LTCI benefits significantly increase labor force participation among women but have no corresponding effect among men. Additionally, the benefits reduce women's likelihood of engaging in family caregiving as their primary activity. These findings highlight the crucial role of long-term care policies in shaping labor market outcomes for caregivers, with notable implications for the dynamics of women's labor supply.

“Monetary Policy and Labor Market Gender Gaps,” with Valentina Flamini, Diego B. P. Gomes, Bihong Huang, Lisa Kolovich, Aleksandra Zdzienicka, IMF Working Paper No. 23/211, International Monetary Fund (2023). [Link]

Abstract

We study the effects of monetary policy shocks on employment gender gaps in a panel of 22 countries using quarterly data from 1990 to 2019. Our results show that men’s employment falls more than women’s after contractionary monetary policy shocks, narrowing the employment gender gap over time. Two factors contribute to explaining this heterogeneous effect. First, a larger impact of monetary policy shocks on employment in the industry sector that employs more men. Second, the larger response of the employment gap in the sector (services) that employs the largest share of men and women. In terms of labor market adjustment, the narrowing of the gender employment gap is initially driven by a reduction in the gender unemployment gaps that, over time, results in an adjustment in the gender labor force participation gap—with men’s labor force participation dropping more than women’s. The effects are larger in countries with more flexible labor market regulations, higher gender wage gaps, and lower informal women’s employment compared to men’s. Finally, the effects are also larger for contractionary monetary policy shocks and during expansions.

Works in Progress

“Consumer Responses to Fed Communications: Prior Beliefs, Consumption, Demographics”

Policy Papers

“The Unequal Effect of Interest Rates by Race, Gender,” [Link] Federal Reserve Bank of San Francisco, Economic Letter 2022-19 (2022).

“Increased Pass-Through Business Tax Break Would Worsen Inequality Without Boosting Growth” with Juan Montecino, Mary Hansen, Selin Seçil Akın, and Ignacio González [Link] Inequality.org (2025).

“Republicans are Reportedly Considering a Tax Hike on the Rich. How Would this Affect Growth?” with Juan Montecino, Mary Hansen, and Ignacio González [Link] Inequality.org (2025).

“Raising Capital Gains Taxes Would Reduce Inequality Without Economic Costs,” with Juan Montecino, Mary Hansen, and Ignacio González [Link] Inequality.org (2025).