Abstract: Constrained, “hand-to-mouth,” households with zero liquid wealth are a central building block of modern heterogeneous-agent consumption models. We document empirically that many of these seemingly borrowing-constrained households actually revolve intermediate levels of high-interest credit card debt, meaning that they are not constrained at either the zero-liquid-wealth kink nor at their credit card borrowing limit. This finding presents a challenge: how can heterogeneous-agent models generate empirically realistic marginal propensities to consume without relying on borrowing-constrained households? We show that present bias induces households to revolve modest levels of credit card debt, but their indebted saving behavior still generates elevated MPCs. We then apply this insight to highlight key channels through which credit card borrowing reshapes households’ responses to fiscal and monetary policy.

Abstract: We estimate the impact of household liquidity provision on macroeconomic stabilization using the 2020 CARES Act mortgage forbearance program. We leverage intermediation frictions in forbearance induced by mortgage servicers to identify the effect of reducing short-term payments with little change in long-term debt obligations on local labor market outcomes. Following statewide business reopenings, a one percentage point increase in the share of mortgages in forbearance leads to a 30 basis point increase in monthly employment growth in non-tradable industries. In a model incorporating geographical heterogeneity in intermediation frictions, these responses imply a household-level marginal propensity to consume out of increased liquidity that aligns with existing estimates for direct fiscal transfers. The implied debt-financed fiscal multiplier effects of forbearance are sizable but depend on the repayment terms of deferred payments and the monetary policy stance.

Abstract: We investigate the impact of financial windfalls on household portfolio choices and risk exposure. Exploiting the randomized assignment of lottery prizes in three Swedish lotteries, we find a windfall gain of $100K leads to a 5 percentage point decrease in the risky share of household portfolios. We show theoretically that negative wealth effects are consistent with both constant and decreasing relative risk aversion and analyze how our empirical estimates help distinguish between competing models of portfolio choice. We further show our results are quantitatively aligned with the predictions of a calibrated dynamic portfolio choice model with nontradable human capital and consumption habits.

Mendelian imputation of parental genotypes improves estimates of direct genetic effects

Young et al. (2022). Nature Genetics, 54: 897-905.

Genomic analysis of diet composition finds novel loci and associations with health and lifestyle

Meddens et al. (2021). Molecular Psychiatry, 26: 2056-2069.

Gene discovery and polygenic prediction from a genome-wide association study of educational attainment in 1.1 million individuals

Lee et al. (2018). Nature Genetics, 50: 1112-1121.