Expectation and Wealth Heterogeneity in the Macroeconomy

Department of Economics and Decision Sciences

Speaker : Alexandre Kohlhas (Oxford Univ. & IIES)

Room T-007

Abstract :

We document systematic differences in macroeconomic expectations across U.S. households and rationalize our findings with a theory of information choice. We embed this theory into an incomplete-markets model with aggregate risk. Our model is quantitatively consistent with the pattern of expectation heterogeneity in the data. Relative to a full-information counterpart, our model implies substantially increased macroeconomic volatility and inequality. We show through the example of a wealth tax that neglecting the information channel leads to erroneous conclusions about the effects of macroeconomic policies. While in the model without information choice a wealth tax reduces wealth inequality, in our framework it reduces information acquired in the economy, leading to increased volatility and higher top-end wealth inequality in equilibrium.

Joint work with Tobias Broer, Kurt Mitman & Kathrin Schlafmann