Working Papers

Time-use, Growth, and Structural Change


Time Use and the Efficiency of Heterogeneous Markups. (2024). (joint with Brian C. Albrecht and Thomas Phelan).
  • Status: Reject and Resubmit (RESTUD); Theory Version Now Under Review (Journal of Economic Theory)
  • Abstract: What are the welfare implications of markup heterogeneity across firms? In standard monopolistic competition models, such heterogeneity implies inefficiency even in the presence of free entry. We enrich the standard model with heterogeneous firms so that preferences are non-separable in off-market time and market consumption and show that homogeneity of markups is now neither necessary nor sufficient for efficiency. The marginal cost of the marginal firm is weakly inefficiently high when off-market time and market consumption are complements and inefficiently low when they are substitutes, and the equilibrium allocation devotes weakly too few resources to firm creation. However, when off-market time and market consumption are perfect complements, markups are heterogeneous across firms and yet the equilibrium allocation is efficient. 

Health Sector Structural Change. (2024).  (joint with Maria Feldman). 
  • Status: Under Review (AEJ: Macroeconomics)
  • Abstract: The U.S. health-services sector has grown both in terms of its expenditure share and relative price. Relative sectoral markups have driven relative price growth, followed by differential rates of sectoral technological progress, but not population aging. Population aging is driven by two channels: 1) exogenous variation in fertility; 2) endogenous changes to healthiness due to increased health investment driving up survival rates. We find no role for endogenous aging contributing to health sector structural change. Aggregate output growth rates are unaffected by endogenous longevity gains, but growth is suppressed when fertility declines and TFP growth in the non-health-services sector slows.
  • Presentations: (2023) University of Bristol, UK; University of Manchester, UK; SEA Meetings, New Orleans; Goethe University, Frankfurt, Germany; University of Wuerzburg, Germany; UCSB, LAEF 2nd Labor Markets and Macroeconomic Outcomes Conference; FRB, Cleveland.
  • Notes: A previous version was circulated under the titles The Causal Factors Driving the Rise in Health Services Prices and The Causal Factors Driving the Rise in U.S. Health-services Prices.

Structural Change with Time to Consume. (2023). (joint with W.L. Bednar).
  • Status: Under Review (JPE Macro)
  • Abstract: Consumers allocate income toward consumption of goods and services and off-market time toward activities using either goods or services. A model with time to consume embeds rich income effects, which has implications for the causal mechanism driving the rise in the services share of U.S. expenditure. We estimate that consumers increasingly treat goods as luxuries relative to services, because the relative efficiency of using goods versus services, from the perspective of the consumer, has improved. The rise in the services share of U.S. expenditure is primarily attributable to the decline in the relative price of goods to services.
  • Presentations: (2023) FRB, Atlanta; (2022) FRB, Philadelphia; Midwest Macro, Dallas, TX; UCSB, LAEF Growth, Development, and Structural Transformation Conference; University of Pittsburgh; University of Wuerzburg, Germany; (2021) NBER-NAS SBIES (Virtual); Vigo Workshop on Dynamic Macro, Vigo Spain; SED, Minneapolis, MN; University of Miami, Florida (Virtual); (2020) SNDE, Virtual; University of Miami, Florida (Virtual); (2019) UCSB; Midwest Macro, East Lansing, MI; SED, Saint Louis, MO; (2018) UCSB.
  • Notes: Some components of this draft were previously circulated under the titles The Evolution of the Consumption Experience: Why the Services Share Has Risen, Home Production with Time to Consume, and Structural Change Under Home Production with Time to Consume. This draft focusses on how changes to the consumption experience, as measured by off-market time use patterns, have contributed to the rising services share of expenditure.
  • Supplementary Material: Technical Appendices

Measuring Inequality with Consumption Time. (2023).
  • Abstract: I construct and estimate a measure of inequality that accounts for non-separabilities between the allocation of market expenditure and off-market time toward a vector of multiple consumption activities. Different kinds of market consumption are complementary/substitutable with off-market time to different degrees. Using time-use and expenditure data, model-implied dispersion over the 2003-2018 period is 3 to 7 times less than that implied directly by expenditure data and 2.5 to 5.5 times less than that implied by wages. Accounting for product-type/time-use heterogeneity matters: dispersion from a model with multiple activity categories is also less than that from a classic, single-good consumption/leisure model.
  • Presentations: (2023) University of Warwick, UK; FRB, Philadelphia; University of Connecticut; Federal Reserve Board of Governors; FRB, St. Louis; The Australian National University; (2022) Williams College; Southern Methodist University; Stony Brook University (SUNY); Midwest Macro, Logan, UT.
  • Supplementary Material: Technical Appendices, Slides, ATUS/CEX/NIPA Classification Crosswalk

The Intergenerational Welfare Implications of Disease Contagion. (2020).
  • Status: Dormant
  • Abstract: Using endogenous, age-dependent measures of the value of statistical lives (VSL), this paper examines the demographic implications of recessions driven by disease contagions. Depending on the age-distribution mortality profile of the disease, long-run welfare losses resulting from the recession may outweigh lost VSL’s directly attributable to the disease. This is because disease contagions that induce high levels of hospitalization simultaneously impact aggregate output, via a recession caused by social-distancing, and the productivity of health care services. The efficiency of health investment falls driving down life expectancy (LE). VSL’s fall both because LE’s fall and the marginal value of health care investment falls. Using the Hall and Jones (2007) model of age-specific, endogenous health investment, it is shown that the COVID-19 crisis of 2020 will lead to lost welfare for young agents that exceeds VSL’s lost from the disease. If COVID-19 had the same age-mortality profile as the 1918 Spanish Flu, where more young agents died, contagion-mitigation policies that cause deep recessions would still be socially optimal since more of the high-valued lives of young people would be saved.
  • Presentations: (2020) Macro-Dev-Trade-Environment Group Meeting, Virtual, Iowa State.

The Costs and Benefits of Caring: Aggregate Burdens of an Aging Population. NBER Working Paper #25498. (2019). (joint with Finn Kydland).
  • Status: Dormant
  • Abstract: Throughout the 21st century, population aging in the United States will lead to increases in the number of elderly people requiring some form of living assistance which, as some argue, is to be seen as a burden on society, straining old-age insurance systems and requiring younger agents to devote an increasing fraction of their time toward caring for infirm elders. Given this concern, it is natural to ask how aggregate GDP growth is affected by such a phenomenon. We develop an overlapping generations model where young agents face idiosyncratic risk of contracting an old-age disease, like for example Alzheimer's or dementia, which adversely affects their ability to fully enjoy consumption. Young agents care about their infirm elders and can choose to supplement elder welfare by spending time taking care of them. Through this channel, aggregate GDP growth endogenously depends on young agents' degree of altruism. We calibrate the model and show that projected population aging will lead to future reductions in output of 17% by 2056 and 39% by 2096 relative to an economy with a constant population distribution. Curing diseases like Alzheimer's and dementia can lead to a compounded output increase of 5.4% while improving welfare for all agents.
  • Press:  Benefits Pro; Who Will Care for All the Old People? VoxEU in: Live Long and Prosper? The Economics of Ageing Populations. (2019); NPR's The Confluence, 90.5 WESA, Pittsburgh (June 30, 2023).
  • Presentations: (2019) SNDE, Dallas Fed; XXIV Workshop on Dynamic Macro, Vigo Spain; (2018) UCSB; University of Missouri; Midwest Macro, Madison, WI; SED, Mexico City.

Public Finance


Subsidies for Close Substitutes: Evidence from Residential Solar Systems. (2023). (joint with Alexander Abajian)
  • Status: Under Review (Energy Economics)
  • Abstract: Policies promoting residential solar adoption assume the associated generation displaces residential demand from the grid on a one-for-one basis. This assumption is innocuous only if electricity from solar systems and the grid are perfect substitutes. We use a model of U.S. residential electricity demand allowing for spatial heterogeneity to estimate the extent of this substitution. Our estimates suggest this assumption is unlikely to hold; subsidies inducing one kWh of residential solar electricity demand displace only 0.5 kWh of grid consumption. As an emissions reduction policy, subsidies had national costs of $332 per MTCO2 in 2018.
  • Presentations: (2022) University at Albany (SUNY); SED, Madison, WI.
  • Supplementary Material: Technical Appendices, Data and Code
  • Notes: A previous version of this paper was circulated under the title An Aggregate Perspective on the Geo-spatial Distribution of Residential Solar Panels.

Behavioral Models

Modeling Mental Accounting through Two-stage Budgeting with Bounded Rationality. (2024). (joint with Christopher Y. Olivola and Alan Montgomery). 

  • Status: Under Review (Management Science)
  • Abstract: We construct a unifying theory of two-stage budgeting and bounded rationality with mental accounting features. Mental accounting and rational inattention induce behavioral wedges between first-stage and second-stage expenditure budgets, reducing the fungibility of money across accounts. Because reviewing one's financial activities is cognitively costly, consumers might re-assess only a subset of their spending budgets every period. Over- or under-spending affects future budgeting and expenditure decisions. We apply latent Bayesian inference to agent-level weekly expenditure data in order to structurally estimate the degree to which low-income consumers appear rationally constrained with respect to budgeting. Our findings provide insight into how consumers may respond to interventions that encourage more disciplined budgeting behavior, like push notifications in budgeting apps. We show that if financial attentiveness constraints are relaxed, consumers who want but fail to discipline their expenditure may become financially worse off. 
  • Presentations: (2022) FUR Conference, Ghent, Belgium; (2021) Columbia University, New York; (2020) INFER (Virtual); NBER-NSF SBIES (Virtual); UCSB, Theory Underground; ARC for Financial Planning, Washington D.C.; (2019) ACR, Atlanta; (2017) INFORMS Marketing Science, Los Angeles.
  • Supplementary Material: Technical Appendices
  • Notes: Previous versions of this paper were circulated under the titles Two-stage Budgeting with Bounded Rationality, A Structual Model of Mental Accounting,  and Two-stage Budgeting Under Mental Accounting.

Durables, Non-Durables, and a Structural Test of Fungibility. (2018). (joint with Alan Montgomery and Christopher Y. Olivola).
  • Status: Dormant
  • Abstract: In his 1999 summary of all things mental accounting, Richard Thaler describes one of the primary components of mental accounting as the budgeting of specific utility-providing activities which can depend, but does not have to, on the resources used to fund those activities. The analysis presented in this paper focusses specifically on household expenditure of durable and non-durable goods and the liquidity sources used to fund these different expenditures. Specifically, we exploit a linked dataset of credit and debit card users to examine consumer purchasing patterns of durable and non-durable consumption commodities under both methods of payment. Our findings suggest that on average durable purchases are more sensitive to increases in available credit than non-durable purchases, and most consumers are more likely to increase total consumption due to increases in available credit than increases in available checking account balances. We empirically show that the standard neo-classical consumption/savings model, the equilibrium conditions of which implicitly assume that the household’s available resources (liquidity and investments) are perfectly fungible, fails to rationalize our data for the median/modal consumer in our sample. However, our results are rich because we also show that the behavioral distribution of consumers includes both households which treat liquidity as fungible and those that do not. Given the heterogeneity we find, future work should test whether these results would matter on aggregate.
  • Presentations: (2019) ACR, Atlanta; Finance Forum, Madrid; (2018) Boulder Consumer Finance Conference; BDRM, Harvard; SJDM, New Orleans.