Date/Time Date(s) - 25/03/202611:30 am - 12:30 pm
Julian Kozlowski is a Senior Economic Policy Advisor in the Research Division of the Federal Reserve Bank of St. Louis. He also teaches graduate-level Financial Economics at Washington University in St. Louis. His research focuses on macro-finance, with particular emphasis on the role of liquidity, imperfect information, and inequality in shaping economic fluctuations and financial markets. Kozlowski received his Ph.D. in Economics from New York University in 2018. He previously earned M.A. and B.A. degrees in Economics from Universidad Torcuato Di Tella in Argentina. His research has been published in leading journals, including the Journal of Political Economy, American Economic Journal: Macroeconomics, Journal of Economic Theory, and the Review of Economic Dynamics, among others.
He will be presenting,”Heterogeneous Returns and Portfolio Composition: A Life-Cycle Model Meets U.S. Data”.
Abstract
Heterogeneous rates of return on wealth have been proposed as a key driver of wealth inequality. We revisit this mechanism using a quantitative life-cycle portfolio model disciplined by longitudinal U.S. data. Using the Panel Study of Income Dynamics (PSID), we measure asset-level returns and portfolio allocations over the life cycle. We show that household return heterogeneity is almost entirely due to differences in asset composition: within asset classes, the variance of returns to liquid assets, housing, and pensions is similar and small, while the variance of returns to private business is more than twenty times larger. Business owners represent a small share of all households, but they comprise the vast majority of the wealthiest; excluding business dramatically reduces return variance, especially for wealthy households. These findings imply that models of wealth inequality should incorporate meaningful portfolio choice, not just heterogeneous returns within a single asset class. Guided by these facts, we develop a heterogeneous-agent life-cycle model in which households choose portfolios consisting of a liquid asset and illiquid assets such as housing, pensions, and private business. Returns to private business are endogenous and heterogeneous, while returns on other assets are common across households. We use the model to quantify the contribution of heterogeneous returns to U.S. wealth inequality and to assess how the source of return heterogeneity affects the elasticity of wealth with respect to taxes.
Learn more about Julian’s work and connect with him through his professional website.