Search Results
Working Paper
Dividend Taxes and Stock Volatility
How do dividend taxes affect stock volatility? In this paper, I use a decrease in dividend taxes as a natural experiment to identify their impact on firm's price volatility. If a risk-averse executive faces price risk through his incentive contract, changes in stock volatility due to dividend taxes may increase agency costs and therefore decrease overall welfare. Stock volatility decreased after the tax cut for firms where an executive has large holdings of shares and options relative to firms where an executive has small holdings of shares and options. Therefore, with a risk-averse executive ...
Newsletter
Improving Transparency and Accountability in State Budgeting
On December 7, 2015, the Volcker Alliance, the Institute of Government and Public Affairs at the University of Illinois and the Federal Reserve Bank of Chicago held a conference examining ways to increase transparency and accountability in state (and local) budgeting. Based on research presented at the conference, the main speakers recommended budgetary principles and practices that, if adopted, would improve public understanding of the true nature, cost and consequences of states? tax policies and spending commitments.
Working Paper
Synergizing Ventures
Venture capital (VC) and growth are examined both empirically and theoretically. Empirically, VC-backed startups have higher early growth rates and initial patent quality than non-VC-backed ones. VC backing increases a startup's likelihood of reaching the right tails of the firm size and innovation distributions. Furthermore, outcomes are better for startups matched with more experienced venture capitalists. An endogenous growth model, where venture capitalists provide both expertise and financing for business startups, is constructed to match these facts. The presence of venture capital, the ...
Working Paper
On the Distributional Effects of International Tariffs
We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the U.S. and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor and capital income, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth households, while only wealthy ...
Working Paper
The Impact of the 2017 Tax Cuts and Jobs Act on U.S. Multinationals’ Intangible Assets
This paper investigates the impact of the 2017 Tax Cuts and Jobs Act (TCJA) on U.S. multinationals’ intangibles. We develop a theoretical model that incorporates key provisions of the TCJA—the Global Intangible Low-Taxed Income (GILTI) and the Foreign-Derived Intangible Income (FDII)—and derive testable implications for changes in licensing and patent transfer patterns. Using data on international royalty flows and patent assignments, we test the model’s predictions. Our findings suggest that the TCJA may have impacted profit shifting strategies through intangibles, aligning with our ...
Newsletter
The Burden of Taxation in the United States and Germany
After 35 years without significant changes to the federal tax code in the United States, tax reform is back on the legislative agenda. Both the congressional Republican delegation (the House GOP) and the Trump administration (the administration) have released draft proposals for tax reform. And both focus heavily on reform of corporate income taxation. The reason for this is quite simple: Increased globalization has made it easier for multinational enterprises to shift their reported profits around the world in order to pay less in taxes. This has led to concerns about the erosion of the U.S. ...
Working Paper
On the Distributional Effects of International Tariffs
We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the US and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor, and capital income, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth households, while only wealthy ...
Working Paper
Estimating the Intergenerational Elasticity and Rank Association in the U.S.: Overcoming the Current Limitations of Tax Data
Ideal estimates of the intergenerational elasticity (IGE) in income require a large panel of income data covering the entire working lifetimes for two generations. Previous studies have demonstrated that using short panels and covering only certain portions of the life cycle can lead to considerable bias. A recent influential study by Chetty et al. (2014) using tax data estimates the IGE in family income for the entire U.S. to be 0.344, considerably lower than most previous estimates. Despite the seeming advantages of extremely large samples of administrative tax data, I demonstrate that the ...
Journal Article
External Shocks versus Domestic Policies in Emerging Markets
Debt crises in emerging markets have been linked to large fiscal deficits, high inflation rates, and large devaluations. This article studies a sovereign default model with domestic fiscal and monetary policies to understand Argentina's experience during the 2000s commodity boom (2005–2017), following the default of 2001. The model suggests that domestic policies played a critical role in Argentina's poor economic performance. Despite exceptionally favorable terms of trade, a rise in government spending led to higher taxation, inflation and currency depreciation, and lower output. Economic ...
Journal Article
Financial Well-being: At the Convergence of People and Place – Reflections from a Chicago Conversation
This brief collection of writings is based on a convening, hosted by the Federal Reserve Bank of Chicago, to have a local conversation about financial well-being. This gathering was motivated by ?What It?s Worth,? a joint publication of the Corporation for Enterprise Development (CFED) and the Federal Reserve Bank of San Francisco, collecting insights from thought leaders across the country on the topic of financial capacity for families and communities.