- Macroeconomics / Consumption & Savings / Wealth Inequality

1. Household Wealth Accumulation and Portfolio Choices in Korea
2. Accounting for Cross-Country Differences in Wealth - The Quantitative Role of Market Frictions

- International Economics

1. Trade Liberalizations in Latin America and Eastern Europe: The Cases of Ecuador and Slovenia (with Julián Díaz)
2. Trade Liberalization and Consumption Inequality (with Julián Díaz)
3. Enforcement Constraints and Output Volatility (with Julián Díaz)

- Public Economics

   1. Social Impact of a Tax Reform: The Case of Ethiopia (with Sònia Muñoz)

 

This paper constructs a quantitative lifecycle model with uninsurable labor income and aggregate housing return risk to assess how Korean households make saving and portfolio allocation decisions. The model incorporates the special roles housing plays in the portfolio of households: collateral, a source of service flows, as well as a source of potential capital gains or losses. In the model, a household first makes the decision whether to rent or to buy a house and then chooses the housing value. The model adds to existing models of wealth accumulation some unique institutional features present in Korea, namely the rental system (‘chonsae’) and the lack of a mortgage system. When the model is calibrated to match the Korean economy, several key features of the data are better able to be reproduced. The paper also analyzes the role of institutional features by comparing several alternative housing market arrangements and the introduction of a pay-as-you-go social security system to assess their impact on wealth accumulation, portfolio choices, and the pattern of homeownership. I find that expanding the mortgage system significantly increases the homeownership ratio, while alternative rental arrangements have mixed effects on the homeownership ratio. All of  the alternative market arrangements raise the fraction of household wealth invested into housing assets. I also find that the introduction of social security system will lower the overall savings in Korea by approximately 17% and lower the homeownership ratio by 10 percentage points.

This paper analyzes the potential effects of two ongoing trade liberalization experiences: Ecuador signing a Free Trade Agreement with the United States and Slovenia joining the European Union as a full member. We construct a static Applied General Equilibrium Model and perform a numerical experiment that consists on eliminating all import tariffs that Ecuador and Slovenia impose on the United States and European Union, respectively. To calibrate our models, we work with Input-Output tables and construct a Social Accounting Matrix for each country. We perform additional numerical experiments, such as sensitivity analysis on the import elasticities of substitution, a partial liberalization scenario, the fiscal impact of eliminating the tariff revenues and how this loss can be compensated with other taxes, and an alternative trade liberalization framework for Slovenia. We find that both countries benefit from these trade liberalization reforms, with prices falling in the import sector and production rising in the export sector. However, different forms of trade liberalization (free trade agreement vs. customs union) have different implications on the patterns of trade and welfare.

This paper constructs a quantitative general equilibrium lifecycle model with uninsurable labor income to account for the differences in the pattern of wealth accumulation across two countries, Korea and the United States. The model incorporates the differences in the housing market institution in the two countries, namely, the mortgage market and the rental market. As a focal point of the model, housing plays multiple roles for households: collateral as well as a source of service flows. The results from the calibrated model can quantitatively explain some empirical findings on the profile of wealth and homeownership in the aggregate as well as over the life cycle. The mortgage market alone can account for more than 50 percent of the differences in the aggregate homeownership ratios in the two countries, as well as 11 percent of the differences in the capital output ratios. On the other hand, the difference in the rental market is unable to account for the differences in the homeownership patterns, while it only accounts for around 5 percent of the differences in the aggregate wealth in the two countries. Welfare analysis shows that both institutions, when changed, can result in positive overall gains but mixed implications for different age groups.