Abstract: We document how lifetime utility varies by demographic groups in the US and how these differences have evolved since the start of the 21st century. Using the equivalent variation as our measure of welfare we find that the standard deviation in cross-sectional well-being between demographic groups is comparable to the standard deviation of relative annual income in prime earning years and double the standard deviation of relative consumption. Our metric includes consumption, leisure, and mortality risk. The results are primarily driven by differences in consumption and life expectancy. Controlling for other demographics, welfare is increasing in educational attainment and is higher for women and those of Asian descent. This qualitative ordering is robust to classifying a broad measure of home production and child care as work and various definitions of real consumption. Finally, we show that changes in mortality rates associated with `deaths of despair' disproportionately lower the welfare of less educated Whites.
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Abstract: This paper argues that the impact on economic growth from the on-going demographic transition in the population age-distribution depends critically on the relative importance of labor versus capital in production. Our key insight is that as the working share of the population decreases, output per person does not necessarily fall. Within a simple model of aggregate production, population aging can increase output per person, if production is sufficiently capital intensive. Cross-country regressions provide empirical support for our theory.
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Abstract: We show that consumption expenditures for older households are more responsive to monetary policy shocks than for young or middle-aged households. A one standard deviation expansionary monetary policy shock induces a statistically significant and quantitatively large (1.7%) increase in aggregate consumption for old households over the ensuing 3 years. The responses for young and middle-aged households are smaller and not statistically significant. We also present evidence suggesting that life-cycle wealth effects play a role in driving the responses. We then build the wealth mechanism into a partial equilibrium life-cycle model, which can qualitatively match the empirical patterns.
Paper NBER Digest Feature (Oct 2019)

Abstract: We present a model of a multinational firm to quantify the eects of policy changes in repatriation tax rates. The framework captures the dynamic responses of the firm from the time a policy change is anticipated through its enactment, including its long- run effects. We find that failing to account for anticipatory behavior surrounding a reduction in repatriation tax rates overstates the amount of profits repatriated from abroad and underestimates tax revenue losses. We further show that policy changes have a relatively small impact on hiring and investment decisions if firms have relatively easy access to credit markets – as is the case for most multinational firms. Finally, by altering the relative price of holding assets abroad, news of a future reduction in repatriation tax rates acts as an implicit tax on repatriating funds today. We capture and quantify this "shadow tax."
Paper Appendix

Abstract: This paper shows that in ation has been an important determinant of firm-level liquid asset holdings. Liquid assets as a share of total assets – the cash ratio – for U.S. corporations steadily declined from the 1960s to the early 1980s, and has since steadily increased. Our empirical analysis finds that in ation is a key factor accounting for these changes. We show that these liquid asset holdings are imperfectly hedged against in ation. Hence, changes in in ation alter the real value of a firm's liquid asset portfolio causing them to readjust these balances.
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Abstract: We use a model of household life-cycle saving decisions to quantify the impact of demographic changes on aggregate household saving rates in Japan, China, and India. The observed age distributions help explain the contrasting saving patterns over time across the three countries. In the model simulations, the growing number of retirees suppresses Japanese saving rates, while decreasing family size increases saving for both China and India. Projecting forward, the model predicts a decline in household saving rates in Japan and China.
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Abstract: This paper investigates the impact of economic reforms on China’s growth in total factor productivity (TFP). I build a model with two sectors in production – the private and the state sectors – that features capital market imperfections on the private sector. Following the removal of prohibitive barriers to private entrepreneurship (reforms), TFP gains follow the expansion of the private sector and the closure of the least productive state enterprises. Although the distribution of production technologies in both sectors is identical, the model generates persistently higher TFP in the private sector via a selection mechanism arising from financial frictions.
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Abstract: This paper studies how demographic variation aects the aggregate household saving rate. We focus on China because it is experiencing an historic demographic transition and has had a massive increase in household saving. We conduct a quantitative investigation using a structural overlapping generations model that incorporates parental care through support for dependent children and financial transfers to retirees. The saving decisions in the parameterized model mimics many of the features observed in the Chinese household saving rate time series from 1955 to 2009. Demographic change alone accounts for over half of the saving rate increase.
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Abstract: Can standard business cycle methodology be applied to China? In this chapter, we address this question by examining the macroeconomic time series and identifying dimensions in which China differs from economies (such as Canada and the United States) that are typically the subject of business cycle research. We show that naively applying the standard business cycle tools to China is no more ridiculous than applying it to Canada, although the dimensions along which the model struggles is different. For China, the model cannot account for the low level of consumption (or high saving) as a proportion of income observed in the data. An examination of provincial level consumption data suggests that the absence of channels for intranational consumption risk sharing may be an important reason why the business cycle model has trouble accounting for Chinese consumption and saving behavior.
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Abstract: We use local projections to estimate the cross-country distribution of real GDP per capita growth impulse responses to global and idiosyncratic temperature shocks. Negative growth responses to global temperature at longer horizons are found for all Group of Seven countries while positive responses are found for seven of the nine poorest countries. Global temperature shocks have negative effects on growth for around half of the countries and seemingly anomalous positive effects for the other half. After controlling for latitude and average temperature, positive growth responses to global temperature shocks are more likely for countries that are poorer, have experienced slower growth, are less educated (lower high school attainment), less open to trade, and more authoritarian.
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Abstract: We study the qualitative consequences of accounting for an unexplored source of heterogeneity in a model with nominal rigidities. Using micro-level data, we present evidence that older individuals are less willing to substitute across varieties of goods. In particular, we estimate the elasticity of substitution for different age groups and find that the youngest cohort (aged 25--34) exhibits a higher elasticity of substitution compared to the oldest group (65+). We incorporate this empirical finding in a Rotemberg model of price adjustment and show that the age distribution affects the slope of the Phillips curve. Taken together, our results highlight a new channel by which the age-distribution of a population could impact both the transmission mechanism and efficacy of monetary policy.
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