Grant Category

Macroeconomics and Inequality

What are the implications of inequality on the long-term stability of our economy and its growth potential?

What are the implications of inequality on the long-term stability of our economy and its growth potential?

A larger share of U.S. national income has been flowing to the individuals at the top of the income and wealth ladder. These individuals are less likely to spend and more likely to save their money than those with lower income. There is evidence that growing income inequality may be contributing to the so-called secular stagnation of macroeconomic growth.

Growing income inequality likely bears on macroeconomic performance through other channels as well. The lower real interest rates that have resulted from higher global saving will limit the ability of conventional monetary policy to stabilize the economy in the next economic downturn. Growing inequality has also contributed to a growing sense that the economy isn’t working for most families, fueling both distrust in institutions and greater political polarization.

We need to better understand the implications of inequality on the long-term stability of our economy and its growth potential. The large and sustained rise in inequality across income and wealth groups, as well as the disparate performance of different geographies and demographic groups, make understanding how these trends could exacerbate economic instability and reduce economic growth a pressing national concern.

  • The effects of monetary policy
  • The effects of fiscal policy
  • The effects of the tax and transfer system
  • Political economy

Explore the Grants We've Awarded

Reset

Aggregate Costs of Workplace Sexual Harassment

Grant Year: 2022

Grant Amount: $15,000

Grant Type: doctoral

Workplace sexual harassment is a pervasive problem that affects women more than men and often leads to a decline in productivity and altered labor market outcomes for survivors. This project is the first to attempt to quantify the implications of workplace sexual harassment for economic growth and gender wage inequality. What are the aggregate implications of workplace sexual harassment? And how can policy effectively reduce its consequences? The authors will use employer-employee linked administrative data from Denmark, along with a survey tracking instances of workplace sexual harassment, to calibrate a quantitative model. They will measure three channels: productivity, the accumulation of human capital, and the allocation of talent. They will also measure how each of these channels affect output and wage inequality, and how harassment affects workers directly reporting harassment, as well as the spillover to other workers at the same firm. These measurements will enable the authors to see when people change jobs after harassment or don’t change jobs, and they plan to look beyond policies intended to address harassment, including policies that boost worker power and mobility.

Monetary Policy and the Dynamics of Wealth Inequality

Grant Year: 2022

Grant Amount: $15,000

Grant Type: doctoral

This project looks to determine the effect of monetary policy on wealth inequality in the United States. The author seeks to add to the literature demonstrating how portfolio heterogeneity is an important driver of wealth inequality. One contribution of the research is the use of the Distributional Financial Accounts. This dataset, collected by the Federal Reserve, reconciles the definitions of wealth between the Fed’s Survey of Consumer Finances and the quarterly flow of data from its Z.1 Financial Accounts of the United States, and then combines the datasets to create a series that tracks wealth for four quantile bins of households by wealth at a quarterly frequency. A key strength of the Distributional Financial Accounts is the ability to decompose quarterly wealth data into component asset and liability classes, allowing for the study of the channels by which monetary policy affects wealth for different groups of U.S. households.

Inequality and Targeting of Disaggregated Policy

Grant Year: 2022

Grant Amount: $74,929

Grant Type: academic

This project explores the question of how policy shocks propagate through the economy. The researchers will build a large dataset using Danish Bank and Danish government administrative data to build matrices of income, consumption, and production in different regions and sectors, as well as how income, consumption, and production in different regions and sectors are interconnected. This “disaggregated economic account” will be used to trace out how a shock that hits one part of the economy propagates to other parts and determine the aggregate impact of the shock. The resulting model will help define optimal policy responses to different kinds of shocks, to measure how certain shocks affect income inequality and growth, and to identify the most important channels that propagate shocks. Tracing how a shock in one sector filters through the economy is only possible with this type of administrative data linked in this way.

The Role of State Policy in Reducing Disparities in Unemployment Insurance Recipiency

Grant Year: 2022

Grant Amount: $75,000

Grant Type: academic

This project will leverage variations in implementation timing of the requirement in the Coronavirus Aid, Relief, and Economic Stimulus, or CARES, Act that employers notify recently separated workers of their eligibility for Unemployment Insurance. It seeks to causally identify whether notification improves the take-up of Unemployment Insurance with an emphasis on Black and Latino workers. The author will compile a database of states’ implementation of required separation notices by employers to employees by state and year. This project is expected to yield credible evidence regarding the efficacy of these employer separation notice requirements on the receipt of Unemployment Insurance. The project will further investigate whether such requirements close the racial divide in receiving Unemployment Insurance. Given known racialized disparities in receiving these benefits, the emphasis on this is critical. The distribution of information on UI eligibility as a mechanism in attenuating (or not) racial disparities would add to policymakers’ understanding of what is driving these disparities. In the case that separation notice requirements increase the take-up of Unemployment Insurance, the project has the potential to identify a relatively low-cost intervention with large payoffs. In the case that separation notice requirements do not improve UI take-up or close racial divides, policymakers may want to reconsider the universal requirements implemented as part of the CARES Act.

Optimal Monetary Policy with Menu Costs is Nominal Wage Targeting

Grant Year: 2021

Grant Amount: $15,000

Grant Type: doctoral

Central banks across the developed world are reconsidering their monetary policy frameworks and are frequently looking to academic research to inform the question of whether to stick with the dominant paradigm of inflation targeting or to adopt a new monetary policy regime. To address this question, Halperin and Caratelli will build a model where price stickiness is modeled in a substantially more realistic way, compared to other models, in order to explore whether it is optimal for central banks to use nominal income targeting rather than inflation targeting. The two researchers will examine whether nominal income targeting would mean that central banks would not have to tighten policy in response to strong wage growth, which could boost equitable growth.

Does Monetary Policy Work Through the Labor Market?

Grant Year: 2021

Grant Amount: $15,000

Grant Type: doctoral

This project examines how increasing labor market polarization affects the transmission of monetary policy. Specifically, Morrison will examine how heterogeneity in worker substitutability with capital affects the role the labor market plays in the transmission of monetary policy. The research will estimate the importance of a heterogeneous worker-capital substitutability channel of monetary policy—investment spurred by monetary policy will have muted effects on aggregate consumption if workers whose labor is complementary with capital tend to have lower marginal propensities to consume. To investigate this phenomenon, she first plans to build and solve a model that captures this effect, then estimate the impulse-response functions of wages of workers in various skill categories to unexpected expansionary monetary shocks.

Experts

Research Advisory Board

Jeffrey Liebman

Harvard University

Learn More
Former Steering Committee

Laura Tyson

University of California, Berkeley

Learn More
Grantee

Susan Lambert

University of Chicago

Learn More
Grantee

Kevin Rinz

U.S. Census Bureau

Learn More
Grantee

Elton Mykerezi

University of Minnesota

Learn More