Recent Award

The past forty years have been characterized by a secular decline in interest rates and, relatedly, an increase in asset valuations. This proposal consists of two projects that examine the distributional effects of declining interest rates. The first project explores the effect of declining interest rates on wealth inequality. The second examines the welfare implications of declining interest rates by focusing on who gains and who loses from this trend. The project further collects detailed data on high wealth income, and granular data on asset purchases from financial filings and surveys. The project has policy implications in understanding the role of monetary policy on wealth inequality and individual welfare.

The first project develops a sufficient statistic approach to determine the long-run effect of lower rates on top wealth inequality, as measured by the Pareto exponent of the wealth distribution. Sufficient statistic is estimated by creating a new dataset on the financing of firms owned by billionaires in the US, by combining surveys of fortunes, financial filings, and stock and firm level financial data. The second project will examine the effect of lower rates, or alternatively higher asset valuations, on individual welfare. Using a standard consumption-saving model, the project will derive a sufficient statistic that captures the lifetime effect of lower rates on welfare. The project will then quantify these statistics by using micro-data on net asset purchases across the whole wealth distribution.