Working Papers
MFA Best Doctoral Paper Award (2021)
WFA PhD Candidate Award For Outstanding Research (2021)
EFA Engelbert Dockner Memorial Prize for the Best Paper by Young Researchers, Runner-Up (2021)
FMA Best Paper in Investments (2021)
Bank of Canada Graduate Student Paper Award, Runner-Up (2022)
Colorado Finance Summit Best PhD Paper Award (2022)
Top Finance Graduate Award (2023)
I show democratizations have a large, negative impact on asset valuations driven by a rise in redistribution risk. Across 90 countries over 200 years, risk premia are substantially elevated in democratizations, similar in magnitude to financial crises. Using a shift in Catholic church doctrine in support of democracy, I provide causal evidence that democratizations increase risk premia. Successful democratizations lead to substantial redistribution: the size of the public sector grows, income inequality falls, and the labor share of income rises. A model of asset prices and political regimes in which wealthy asset market participants face redistribution risk in democratizations can quantitatively explain these effects. The model also explains the negligible asset pricing response to autocratizations. Neither an increase in macroeconomic risk nor generic political risk can explain the results.
Presented At: Econometric Society European Winter Meeting, Econometric Society World Congress, MFA, MFA Doctoral Symposium, Trans-Atlantic Doctoral Conference, WFA, World Finance Conference, Young Economist Symposium, EFA, NFA, FMA, UBC Winter Finance Conference, BSE Summer Forum, Bank of Canada GSPA, Colorado Finance Summit, Top Finance Graduate Award Conference, FIRS, UW-Madison Junior Conference (Scheduled), SITE (Scheduled)
with Sylvain Catherine and Natasha Sarin
Revise and Resubmit, Journal of Finance
Red Rock Finance Conference Best Paper Award (2020)
SFS Cavalcade Best Paper in Asset Pricing (2021)
Marshall Blume Prize in Financial Research (2022)
Recent influential work finds large increases in inequality in the U.S. based on measures of wealth concentration that notably exclude the value of social insurance programs. This paper revisits this conclusion by incorporating Social Security retirement benefits into measures of wealth inequality. We find that top wealth shares have not increased in the last three decades when Social Security is properly accounted for. This finding is robust to assumptions about how taxes and benefits may change in response to system financing concerns. When discounted at the risk-free rate, real Social Security wealth increased substantially from $4.9 trillion in 1989 to $52.6 trillion in 2019. When we adjust the discount rate for long-run macroeconomic risk, this increase remains sizable, growing from over $4.0 trillion in 1989 to $41.2 trillion in 2019. Consequently, by 2019, Social Security wealth represents 59% of the wealth of the bottom 90% of the wealth distribution.
Presented At: Chicago Annual Household Finance Conference*, EconTwitter Conference*, NBER SI CRIW*, Red Rock Finance Conference*, CEPR European Conference on Household Finance*, NFA*, NBER Public Finance*, ASU Sonoran*, SFS Cavalcade, WFA*, NBER SI Inequality and the Macroeconomy*
*Denotes presentation by co-author
Press: Marginal Revolution, Pro-Market, The Economist
Presentation link: SFS Cavalcade
with James Paron and Jessica Wachter
Sovereign debt yields have declined dramatically over the last half-century. Standard explanations for this decline, including aging populations and increases in asset demand from abroad, encounter difficulties when confronted with the full range of evidence across asset classes. We propose instead that the decline in inflation and default risk caused falling interest rates, a phenomenon that is not unique to our century. We show that a model with investment, inventory storage, and sovereign default captures the decline in interest rates, the stability of equity valuation ratios, and the recent reduction in investment and output growth corresponding to the zero lower bound.
Presented At: NBER SI Capital Markets, SF Fed Conference on Macro and Monetary Policy*, WFA*, NBER SI Asset Pricing
*Denotes presentation by co-author
with Marco Grotteria and S. Lakshmi Naaraayanan
We document that foreign lobbying shapes US government spending and public policy. We introduce a comprehensive dataset of 180,000 date-stamped, in-person meetings between foreign agents and individual US legislators, spanning 2000 to 2018 and covering 146 countries and 1,200 legislators. We find that (1) meetings are positively related to legislator lawmaking effectiveness and membership to foreign affairs committee and (2) foreign agents maintain connections with legislators even after they depart from important committees. Around these meetings, (3) foreign countries benefit from increased financial aid and advantageous product tariffs and (4) foreign firms whose governments lobby more often benefit from larger subsidies and US government contracts. Finally, we study benefits and costs accruing to legislators and show (5) monetary and electoral benefits, but no evidence that US legislators are punished by their constituents because they meet with representatives of foreign countries.
Presented At: Craig Holden Memorial Conference, CEPR Political Economy*, ISB Summer Conference, FMA, Emerging Scholars in Banking and Finance Conference*, Strategy and the Business Environment, Chicago Booth Empirical Finance Conference, Edinburgh Corporate Finance Conference*, CEPR Geopolitics of Trade (Scheduled), NBER SI Political Economy, CEPR Geoeconomics (Scheduled)
*Denotes presentation by co-author
with Sylvain Catherine, James Paron, and Natasha Sarin
We present a life-cycle model in which households can invest in short- or long-term assets to hedge against interest-rate risk. Our model matches important stylized facts. First, the share of long-term assets in households' wealth is hump-shaped over the life-cycle. Within cohorts, it increases with wealth and earnings. Second, wealth inequality grows when interest rates fall, but only when wealth does not include the value of Social Security. Hedging demand against interest-rate risk can explain 40% of long-run changes in wealth inequality since 1960.
Presented At: LBS Summer Finance Symposium*, SAET
*Denotes presentation by co-author
Publications
Journal of Public Economics (2020)
with Sylvain Catherine and Natasha Sarin
Press: MarketWatch, MarketWatch, MarketWatch