Working Papers:
Belief Heterogeneity and the Income-Wealth Relationship (with Nigel McClung) (Online Appendix)
- Currently under review
This paper studies a life-cycle model economy in which agents utilize idiosyncratic information to forecast personal income risk. Agents either inherit full information (``dynastic households") or learn to forecast lifetime income using personal employment data given incorrect initial beliefs (``non-dynastic households"). We find that the distribution of initial beliefs regarding the transition probabilities into and out of unemployment greatly impact both aggregate savings and the stationary wealth distribution in a simple model economy. The wealth Gini coefficient in a model economy comprised solely of dynastic agents is 18%-52% lower than in the simulations with both dynastic and non-dynastic households. Optimistic households accumulate less wealth and are more likely to enter states of unemployment with little or no savings and pessimistic households over-accumulate wealth relative to households who inherit correct beliefs. Further, our framework shows how the welfare of rational agents and the value of holding correct beliefs depends on the beliefs of other agents.
Behavioral Biases in General Equilibrium
- Currently under review
This paper studies present bias in a life-cycle model with heterogeneous preferences. Previous research outlining the role of behavioral biases in the macroeconomy largely falls into one of three categories: (1) partial equilibrium, (2) infinite horizon, and (3) homogenous preferences. In partial equilibrium models, present bias implies a high degree of wealth inequality and low aggregate wealth relative to a society of time-consistent discounters. I find general equilibrium price adjustments mitigate the impact of present bias on both wealth inequality and aggregate wealth. However, present bias affects the timing of wealth accumulation and leads to a dramatic increase in wealth inequality beginning at retirement. Heterogeneous exponential and present biased discounting improve the fit of the model economy by producing a higher concentration of wealth among the top 1% and a higher Gini coefficient, compared to a model in which agents are only heterogeneous in their exponential discount factor. This occurs as time-consistent individuals benefit from the aggregate mis-optimization of their present biased peers, an effect absent in homogenous preference models or models in which prices do not adjust in response to aggregate savings.
Human Capital Formation and Quasi-Hyperbolic Discounting
I study the impact of present bias in a three period overlapping generations model in which agents are tasked with splitting their time between working for a low-skill wage and attending school to increase their human capital while young. Agents then receive a human capital augmented, deterministic wage in period two of their lifetime and retire in the third period. A society populated with present biased agents is characterized by lower human capital and lower consumption in old age than a society of exponential discounters. Further, I find that dedicating tax revenue towards education incentive programs (and reducing social security) increased human capital and consumption in all periods of life for both rational and present biased agents.
Mixed Signals: The Effect of Employment Training on Employment Outcomes for Previously Incarcerated Individuals (with Ariel Roddy)
- Currently under review
This work investigates the effects of employment training on employment outcomes for previously incarcerated individuals using two theories developed in the discipline of economics: human capital theory and signaling theory. Human capital theory suggests that pre-employment training increases wages and the likelihood of employment by building relevant skills that would improve productivity. Signaling theory asserts that participation in pre-employment training acts as a signal of participant ability, as ability is known to the applicant but unknown to employers. Using the National Longitudinal Survey of Youth (1997), results reveal improvements in income per week for individuals without a history of incarceration, but not for individuals with a history of incarceration. In fact, training participation led to a reduction in earnings for high ability justice-involved individuals. These results symbolize the current tensions int he criminal justice literature related to the efficacy of employment training in producing benefits for justice-involved populations and complicate the application of economic theory in this context.
Outcomes of a Midwestern Drug Diversion Pilot Program: A Cost Analysis (with Ariel Roddy, Juliette Roddy, and Brad Ray)
- Currently under review
The purpose of this research is to assess the outcomes and cost-efficacy of a four-year drug diversion pilot program in a large Midwestern country across different levels of treatment intensity, defined based on the American Society of Addiction Medicine levels of care (ASAM LOC). Using a set of binary logistic analyses, this work aims to determine 1) if there are significant differences in recidivism outcomes, as measured by re-arrest rates, between completers and non-completers by treatment intensity, and 2) the cost efficacy across the treatment setting within the pilot diversion effort. Findings illustrate decreases in 6- and 12- month recidivism for individuals who completed treatment in the highest intensity treatment setting (3.5 ASAM) and those who completed treatment in the therapeutic community setting. Further, the highest intensity treatment exhibited the highest cost efficacy of all treatment settings supported by the pilot program. results of this research extend the current conception of efficacy as it relates to drug diversion program completion, recidivism, and program costs.
Works in Progress:
College Investment and Heterogenous Patience: Do Good Things Come to Those Who Wait?
Present Bias, Preference Heterogeneity, and Post-Retirement Inequality
Gender Representation in Intermediate Macroeconomics (with Erin Cottle-Hunt and Emma Thoron, `23)
A Marvelous Investment Strategy: Investment Grade Comics and the MCU (with Aditya Gadkari, `22)