Trends in Inequality: Sources and Policy (TRISP)

As part of the NORFACE network, we develop structural household life-cycle models in macroeconomic environments to evaluate the effects of inequality in income, wealth, hours worked and consumption on welfare, and to quantitatively decompose the trends in inequality into their various sources. We then use these models to evaluate the impact of fiscal and monetary policies on inequality and to characterize welfare improving policies. Our approach will account for the interdependencies of all stages of a household’s life-cycle and the threeway interaction between inequality, the macroeconomy, and policy. Our structural interpretation of the data will provide key information for predicting future trends of inequalities and for the design of policy, thereby providing important information to policy makers.

Key questions:

Our research aims at developing structural models of household behavior in a macroeconomic environment to address six questions:

  1. What explains the observed evolution in inequality over the different stages of the life-cycle?
  2. What is the role of policy intervention in the medium and long-run for both observed and projected movements in inequality?
  3. How does inequality affect the effectiveness of policy interventions?
  4. What is the role of macroeconomic feedback (e.g., the evolution of wages and asset returns)?
  5. How does inequality move in the short-run (i.e., in response to shocks to the economy) and what do these movements imply for fiscal and monetary policy responses to shocks?
  6. How will inequality evolve over the coming decades?

Research Projects

Work Package I: The Sources of Inequality

 1. The impact of assortative mating on income inequality over time Nicola Fuchs-Schündeln, Zhao Jin, Alexander Ludwig, Irina Popova

 2. How educational attainments in early life and the working period interact in shaping earnings inequality Manuel Macera, Hitoshi Tsujiyama

 3. The changing opportunities of non-college educated Americans Margherita Borella, Mariacristina De NardiFang Yang

 4. Income taxation and inequality  Alexander BickNicola Fuchs-Schündeln

 5. Role of taxation for the development of income and wealth inequality in the US Joachim HubmerPer Krusell, Tony Smith

 6. Trends and inequality in hours worked and labor-market participation
    a. Labor supply under Heterogeneus Agents: The Case of Complete Markets
    b. Can Stable Preferences Explain Postwar U.S. Hours Worked? 
    Timo Boppart, Per Krusell, Jonna Olsson

 7. Why are some regions so much more productive than others?  Chiara Lacava

 8. How health care policies affect labor supply choices  Eric FrenchHans-Martin von Gaudecker, John Jones

 9. How do Inheritances Shape Wealth Inequality? Theory and Evidence from Sweden  Arash Nekoei, David Seim

10. Household income expectations and debt inequality  Tobias Broer, Filip Rozsypal

Work Package II: Policy Choices

1. On the optimal interplay between early and late education subsidies Fabian Becker, Alexander Ludwig, Dirk Krüger

2. Earnings and consumption risk over the life cycle and the business cycle Giulio FellaMariacristina De Nardi

3. Higher-order income risk over the business cycle: a parametric approach Christopher BuschAlexander Ludwig

4. Monetary policy, heterogeneity and the housing channel  Kurt Mitman

5. Normative perspective on taxation and changes in technology  Mikhail GolosovArash Nekoei, Ali Shourideh