Countersong: Rising or Falling

A recording, analysis and poetic translation of countersong between two Hermit thrushes (Catharus guttatis) recorded in the mountains of Northern New Mexico (United States) on 19 July 2015

Housing Wealth and Aggregate Saving

The recent appreciation in housing value can have large effects on aggregate saving. This paper uses a simulation model to show that aggregate saving will decline substantially if life cycle homeowners spend down their housing windfalls. Homeowners with a bequest motive, however, may save more to assist their children in buying the now more expensive housing. To test whether families spend their housing capital gains, I use housing, income, and consumption data from the Panel Study of Income Dynamics. While a cross-section time-series regression implies that housing wealth does affect saving, a fixed-effects model finds no effect.

The Welfare Cost of Uncertain Tax Policy

Frequent shifts in tax policy can increase uncertainty about future net-of-tax wages and interest income. This paper measures the impact of uncertain tax policy on savings, labor supply, and welfare in the United States. A vector autoregression model with six variables was estimated which found the standard error of the one-year-ahead forecast for the wage tax to be 1.8 percentage points, and for the interest income tax 3.3 percentage points. Furthermore, the negative correlation between unanticipated shifts in the real interest rate and changes in the interest income tax amplifies the variability in the real after-tax return. A two-period model of consumption and labor supply is developed that measures the effect of uncertain taxes on savings, work hours, and taxpayer welfare. Using plausible empirical parameters, it is shown that removing all uncertainty about future tax policy can lead to a welfare gain of 0.4 percent of national income, or about 12 billion dollars in 1985.

Risky Income, Life Cycle Consumption, and Precautionary Savings

This paper argues that precautionary savings against uncertain income comprise a large fraction of aggregate savings. A closed-form approximation for life cycle consumption subject to uncertain interest rates and earnings is derived by taking a second-order Taylor-Series approximation of the Euler equations. Using empirical measures of income uncertainty, I find that precautionary savings comprises up to 56 percent of aggregate life cycle savings. The derived expression for n-period optimal consumption is easily implemented for econometric estimation, and accords well with the exact numerical solution. Empirical comparisons of savings patterns among occupational groups using the Consumer Expenditure Survey contradict the predictions of the life cycle model. Riskier occupations, such as the self-employed and salespersons, save less than other occupations, although this finding may in part reflect unobservable differences in risk aversion among occupations.

Geography and Racial Health Disparities

An extensive literature has documented racial, ethnic, and socioeconomic disparities in health care and health outcomes. We argue that the influence of geography in medical practice needs to be taken seriously for both the statistical measurement of racial disparities, and in designing reforms to reduce disparities. Past research has called attention to disparities that occur within hospitals or provider groups; for example black patients who are treated differently from whites within a hospital. We focus on a different mechanism for disparities; African-Americans tend to live in areas or seek care in regions where quality levels for all patients, black and white, are lower. Thus ensuring equal access to health care at the local or hospital level may not by itself erase overall health care disparities. However, reducing geographic disparities in both the quality of care, and the quality of health care decisions by patients, could have a first-order impact on improving racial disparities in health care and health outcomes.