Department of Economics
1280 Main Street West
Hamilton Ontario L8S 4M4
Institutional Affiliation: McMaster University
NBER Working Papers and Publications
|January 2020||Who Bears the Welfare Costs of Monopoly? The Case of the Credit Card Industry|
with Kyle F. Herkenhoff: w26604
How are the welfare costs from monopoly distributed across U.S. households? We answer this question for the U.S. credit card industry, which is highly concentrated, charges interest rates that are 3.4 to 8.8 percentage points above perfectly competitive pricing, and has repeatedly lost antitrust lawsuits. We depart from existing competitive models by integrating oligopolistic lenders into a heterogeneous agent, defaultable debt framework. Our model accounts for 20 to 50 percent of the spreads observed in the data. Welfare gains from competitive reforms in the 1970s are equivalent to a one-time transfer worth between 0.24 and 1.66 percent of GDP. Along the transition path, 93 percent of individuals are better off. Poor households benefit from increased consumption smoothing, while rich hous...
|June 2019||Implications of Increasing College Attainment for Aging in General Equilibrium|
with Juan Carlos Conesa, Timothy J. Kehoe, Vegard M. Nygaard: w26000
We develop an overlapping generations general equilibrium model of the U.S. economy with heterogeneous consumers who face idiosyncratic earnings and health risk to study the implications of increasing college attainment, decreasing fertility, and increasing longevity (2005–2100). While all three trends contribute to a higher old age dependency ratio, increasing college attainment has different implications because it increases labor productivity. Decreasing fertility and increasing longevity require the government to increase the average labor tax rate from 33.5 to 47.1 percent. Increasing college attainment lowers the required tax increase by 12.0 percentage points. The labor tax rate required to balance the government budget is higher under general equilibrium than in a small open econom...
Published: Juan Carlos Conesa & Timothy J. Kehoe & Vegard M. Nygaard & Gajendran Raveendranathan, 2019. "Implications of Increasing College Attainment for Aging in General Equilibrium," European Economic Review, . citation courtesy of
|May 2017||Macroeconomic Effects of Medicare|
with Juan Carlos Conesa, Daniela Costa, Parisa Kamali, Timothy J. Kehoe, Vegard M. Nygard, Akshar Saxena: w23389
This paper develops an overlapping generations model to study the macroeconomic effects of an unexpected elimination of Medicare. We find that a large share of the elderly respond by substituting Medicaid for Medicare. Consequently, the government saves only 46 cents for every dollar cut in Medicare spending. We argue that a comparison of steady states is insufficient to evaluate the welfare effects of the reform. In particular, we find lower ex-ante welfare gains from eliminating Medicare when we account for the costs of transition. Lastly, we find that a majority of the current population benefits from the reform but that aggregate welfare, measured as the dollar value of the sum of wealth equivalent variations, is higher with Medicare.
Published: Juan Carlos Conesa & Daniela Costa & Parisa Kamali & Timothy J. Kehoe & Vegard M. Nygard & Gajendran Raveendranathan & Akshar Saxena, 2017. "Macroeconomic effects of Medicare," The Journal of the Economics of Ageing, . citation courtesy of