Research
Research
How do interest rates affect durable-goods markets in general equilibrium? I develop a directed-search model of differentiated durables in which state-dependent failure rates sort ex ante identical buyers and sellers across submarkets. Buyers' optimal policy partitions the state space into action and inaction regions with target quality monotonic in the holding, and market tightness is decreasing in quality. Calibrated to U.S. vehicle microdata, the model predicts that a decline in the interest rate triggers a short-run overshoot of durable expenditure; firms reallocate production toward higher-quality submarkets, and the economy converges to a stationary equilibrium of less frequent, higher-quality purchases.
We study optimal taxation in economies with general equilibrium market clearing, where agents with privately known labor skills and entrepreneurial abilities choose between deterministic labor income and risky firm operation. The government observes labor income and realized dividends but not effort or technology shocks. We formulate the multidimensional screening problem as a lottery-based linear optimization, accounting for global incentive constraints, fixed costs and other non-convexities. Optimal policies exhibit tax breaks, which can render net taxes negative, for agents with intermediate entrepreneurial abilities and labor skills above a threshold. General equilibrium strengthens this effect under decreasing returns, as labor-market clearing requires sufficient entry into entrepreneurship, further increasing subsidies for agents with high worker options. In a calibrated U.S. economy, optimal taxes are lower and can be negative for low-profit realizations. Subsidies rise when risk declines and when the frequency of high-ability entrepreneurs in the population diminishes. Global incentive constraints bind only near the occupational frontier, amplifying tax breaks for marginal entrepreneurs.
To study how peer-dependent replacement interacts with embodied innovation, I introduce a vintage-capital economy in which capital users choose when to replace old vintages and capital-goods producers choose how fast to improve the frontier. Users interact through a product-market quality benchmark built from the installed capital of their peers; producers interact with users through the market size created by replacement demand. The central mechanism is a two-way feedback between replacement and innovation: peer upgrading raises the private cost of operating old capital, while more replacement thickens the market that rewards frontier improvement. When the regular equilibrium correspondence is monotone on the admissible interval, the balanced-growth path is unique. When peer feedback creates a regular turning point, the same primitives support multiple replacement-growth regimes through a saddle-node mechanism, with slow replacement and weak innovation or fast replacement and rapid innovation. In the calibrated economy, belief shifts across continuation branches generate synchronized replacement waves.
We develop a model of asset issuance into an asset market with search frictions and asymmetric information. A monopolistic underwriter screens entrepreneurs' projects and sorts them into different markets characterized by heterogeneous levels of trading frictions. Indirectly, the underwriter affects liquidity (spreads) in the OTC market, where investors with complete information and dealers with asymmetric information interact. We show that a separating contract helps reduce the spreads, as compared to a pooling contract. The model can partially explain why different tiers, with different liquidity levels, are offered to firms of different quality.
In the post 1980s, the U.S. experienced a significant increase in both public and private debt. This increase was sustained by the saving glut of the rich, a large accumulation of assets from the top 1% of earners. We build a NK model with borrowers and savers and redistributive policies that can be funded or unfunded. Unfunded transfers induce fiscal inflation, which erodes the real value of public and private debt, with redistribution occurring through revaluation effects. Funded transfers are instead backed by future taxation on the rich and raise both government and household debt, with redistribution occurring through expected changes in the fiscal burden on high earners. Our structural estimation shows that a shift from unfunded to funded spending in the early 1980s contributed to the saving glut of the rich.
Innovation creates transformative technologies — but adopting them requires coordination. I develop a dynamic network model where adoption in one sector is productive only if complementary sectors also adopt. This generates self-reinforcing cycles: optimism sustains adoption, raises R&D returns, and produces more ideas; pessimism reverses the loop. A single summary statistic — the Network Implementation Multiplier (NIM) — determines whether coordination failures can arise. When the NIM exceeds one, self-fulfilling beliefs sustain multiple equilibria; network-central sectors invest more in R&D and exhibit larger adoption swings across regimes. Coordination failures reduce long-run growth. I estimate cross-sector adoption spillovers across 300 U.S. sectors using a network-IV strategy based on executive mobility and clean CEO turnover. The estimated NIM exceeds one.