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Working Paper
Innovations in Mortgage Markets and Increased Spending on Housing
Doms, Mark; Krainer, John (2007-07-01)
Innovations in the mortgage market since the mid-1990s have effectively reduced a number of financing constraints. Coinciding with these innovations, we document a significant change in the propensity for households to own their homes, as well as substantial increases in the share of household income devoted to housing. These changes in housing expenditures are especially large for those groups that faced the greatest financial constraints, and are robust across the changing composition of households and their geographic location. We present evidence that young, constrained households may ...
Working Paper Series , Paper 2007-05

Working Paper
Bundling Time and Goods: Implications for Hours Dispersion
Hannusch, Anne; Fang, Lei; Silos, Pedro (2020-01-01)
We document the large dispersion in hours worked in the cross-section. We account for this fact using a model in which households combine market inputs and time to produce a set of nonmarket activities. To estimate the model, we create a novel data set that pairs market expenditures and time use at the activity level using data from the Consumer Expenditure Survey and the American Time Use Survey, respectively. The estimated model can account for a large fraction of the dispersion of hours worked in the data. The substitutability between market inputs and time within an activity and across a ...
FRB Atlanta Working Paper , Paper 2020-1

Working Paper
Structural Change and the Rise in Markups
Marto, Ricardo (2023-11)
Is the recent rise in markups caused by increased monopoly power or is it a natural consequence of structural change? I show that the rise in aggregate markups has been driven by a reallocation of market share away from non-services to services-producing firms and a faster increase of services’ markups. I develop a two-sector model to assess the sources of the rise in markups, in which the two forces of structural change play opposing roles. On one hand, an increase in the relative productivity of manufacturing leads to a decline of the relative price of manufactured goods and to an ...
Working Papers , Paper 2024-002

Working Paper
Luxuries, Necessities, and the Allocation of Time
Fang, Lei; Hannusch, Anne; Silos, Pedro (2021-12-28)
Households enjoy utility from activities that require a combination of time and goods. We classify activities into two types: luxuries and necessities. Luxuries (necessities) are activities for which time and expenditure shares rise (decline) with income. We develop and estimate a model with nonhomothetic preferences and find that time and goods are substitutable in producing activities. Activities are also substitutable among themselves. Hence, wage and price changes cause large reallocations of time and expenditures across activities. This effect is quantitatively important for welfare ...
FRB Atlanta Working Paper , Paper 2021-28

Working Paper
Why Does Consumption Fluctuate in Old Age and How Should the Government Insure it?
De Nardi, Mariacristina; Borella, Margherita; Blundell, Richard; Commault, Jeanne (2020-10-23)
In old age, consumption can fluctuate because of shocks to available resources and because health shocks affect utility from consumption. We find that even temporary drops in income and health are associated with drops in consumption and most of the effect of temporary drops in health on consumption stems from the reduction in the marginal utility from consumption that they generate. More precisely, after a health shock, richer households adjust their consumption of luxury goods because their utility of consuming them changes. Poorer households, instead, adjust both their necessary and luxury ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 40

Journal Article
Electric Vehicles, Potholes, and Taxes: Who Pays the Price?
Burns, Kalee; Hotchkiss, Julie L. (2023-07-11)
Automobile manufacturers and even some states have ambitious goals to phase out gas-powered cars. Currently, a primary source of automobile infrastructure funding is gasoline taxes. But as electric vehicles replace gasoline-powered cars, less gasoline will be purchased and revenues from the gasoline tax will fall short of what is needed to maintain roads. Consumers who do not purchase electric vehicles—perhaps because they can't afford them—are left to bear the burden of the gasoline tax. This Policy Hub article illustrates the inherent regressivity of the gasoline tax and then simulates ...
Policy Hub , Volume 2023 , Issue 4

Working Paper
Rationally Inattentive Consumer: An Experiment
Civelli, Andrea; Deck, Cary; LeBlanc, Justin D.; Tutino, Antonella (2018-11-19)
This paper presents a laboratory experiment that directly tests the theoretical predictions of consumption choices under rational inattention. Subjects are asked to select consumption when income is random. They can optimally decide to reduce uncertainty about income by acquiring signals about it. The informativeness of the signals directly relates to the cognitive effort required to process the information. We find that subjects? behavior is largely in line with the predictions of the theory: 1) Subjects optimally make stochastic consumption choices; 2) They respond to incentives and changes ...
Working Papers , Paper 1813

Working Paper
Welfare Evaluation in a Heterogeneous Agent Model: How Representative is the CES Representative Consumer?
Tito, Maria D. (2015-12-02)
The present paper investigates the impact of asymmetric price changes on welfare in a model with heterogeneous consumers. I consider consumer heterogeneity a la Anderson et al. (1992). The standard welfare equivalence between the CES representative consumer and the discrete choice model breaks down in presence of asymmetric price changes. In fact, asymmetric variation in prices produce differential gains among heterogeneous consumers. I show that there exists no feasible Kaldor-Hicks income transfer such that the gains are equally redistributed. Intuitively, in presence of decreasing marginal ...
Finance and Economics Discussion Series , Paper 2015-109

Discussion Paper
Mortgage Lock‑In Spurs Recent HELOC Demand
Haughwout, Andrew F.; Lee, Donghoon; Mangrum, Daniel; Scally, Joelle; Van der Klaauw, Wilbert (2024-08-06)
Mortgage balances, the largest component of U.S. household debt, grew by only $77 billion (0.6 percent) in the second quarter of 2024, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. This modest increase reflects a substantial slowdown in mortgage origination; only $374 billion was originated during the second quarter, compared to an average of about $1 trillion per quarter between 2021 and 2022. Meanwhile, after nearly thirteen years of decline, balances on home equity lines of credit (HELOC) have begun to ...
Liberty Street Economics , Paper 20240806

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