In this article, we evaluate in detail the role of debt forgiveness in altering the transmission of labor income risk in the absence of catastrophic out-of-pocket "expense shocks" used in the literature on consumer default. The experiments we present can be thought of as: "If we insure the...

The aftermath of the recent recession has seen calls to use transfers to poorer households as a means to enhance aggregate economic activity. The goal of this paper is to study the effects of wealth redistribution from rich to poor households on consumption and output in the short run. We first...

Recent evidence suggests that households' access to credit has improved. If households can vary labor supply in response to stochastic productivity shocks, changes in credit markets can be expected to alter not only savings and borrowing behavior, but also labor effort. The purpose of this...

In this article, we study the long-run implications of a switch from current U.S. tax policy, which features taxes on labor income, capital income, and consumption, to several alternative systems. These alternatives are revenue-neutral switches to 1) a national sales tax on consumption alone, 2)...

Tertiary education in the U.S. requires large investments that are risky, lumpy, and well-timed. Tertiary education is also heavily subsidized. By making the risk of human capital investment more acceptable, especially to low wealth households, subsidies may increase investment in human capital,...