Before and After Target Date Investing: The General Equilibrium Implications of Retirement Saving Dynamics (Job Market Paper)
This paper quantifies the general equilibrium effects of financial innovation that increases access to equity markets.
I study an overlapping generations model with both idiosyncratic and aggregate risk, solved with machine learning techniques.
A benchmark economy with limited stock market participation and rebalancing frictions matches the current dynamics of macro aggregates,
equity and bond returns, as well as wealth and portfolio concentration. A counterfactual experiment shows how widespread adoption of
target date funds would improve risk sharing, reduce inequality, and generate substantial welfare gains for households in the bottom
90% of wealth distribution. The equity premium drops from 6.4% to 1.7%, while the
standard deviation of equity returns stabilizes from 21.9% to 14.6%. The bottom 90% of households gain 20-30% remaining lifetime consumption equivalents. Outcomes are very close between an economy with target date funds and one without any
participation costs or rebalancing frictions.
The Political Economy of China's Housing Boom (with Xu Lu)
This paper provides causal evidence that the Chinese Communist Party's cadre promotion system contributed to China's real estate boom between 2003 and 2015.
We first show that promotions of city-level communist leaders to higher ranks were largely based on city GDP performances. We then identify exogenous shocks to
their promotion chances, caused by new social tie establishments between city-level officials and their superiors, using provincial party leader changes initiated
by the central government. An incumbent city leader who shared the same hometown with a newly appointed provincial leader was 50% more likely to be promoted than
average, regardless of the city's GDP performance. Cities where leaders had hometown connections experienced 40% higher supplies of residential land, while
industrial and commercial land supplies both dropped by 30%, and total land supplies were not affected. House price growth rates were also 50% lower than average in such cities.
A House for a Bride: Marriage and Homeownership in China (with Scarlet Chen)
We first show empirical evidence supporting complementarity between marriage and homeownership: single males with a marriage house, a house where the newlywed
can move into, have 70% higher odds of getting married compared to their counterparts who do not have a marriage house. In the cross section,
county house prices and average age at marriage are highly correlated in both level and in growth rate. We then build a model of household
choice problem with housing demand to quantify the marriage-related incentives in house purchase decisions. The model matches the age profile
of ownership and marriage rate for males aged 16-45 and the path of average age at marriage from 2003 to 2012 in China. When complementarity
between marriage and housing is turned off, there is a 60% reduction in ownership rate, which shows that an important reason for the high
homeownership in China is the non-pecuniary benefit of housing on the marriage market. Our results suggest that housing market policies can
have important implications for demographics in China.
Inequality and Redistribution (with Michael Boskin and Kareem Elnahal)
Using data on U.S. state and federal taxes and transfers over the last quarter century, we
estimate a regression model that yields the marginal effect of any shift of market income share
from one quintile to another on the entire post tax, post-transfer income distribution. We identify
exogenous income distribution changes and account for reverse causality using instruments based on
exposure to international trade shocks, international commodity price shocks and national industry
demand shocks, as well as lagged endogenous variables, with controls for the level of income, the
business cycle and demographics. We find attenuation initially increases in quintile rank, peaks
at the middle quintile and then falls for higher income quintiles, consistent with median voter
political economy theory and the Stiglitz Director's law. We also provide evidence of considerable and systematic spillover effects on
quintiles neither gaining nor losing in the "experiments," also favoring the middle quintile.
"Voting" and "income insurance" coalition analyses are presented. We find a strong
negative relationship between average real income and the degree to which taxes and transfers are