Working Papers


Distributional Consequences of Surging Housing Costs under Schwabe's Law [current versionCESifo working paperCUREM working paperslides], with Volker Grossmann, Hans Torben Löfflad & Thomas Steger
revision requested at the Journal of Economic Theory

Housing costs have been increasing in most industrialized economies since WW2. The burden of rising housing cost is distributed unequally across income groups because the poor spend a larger fraction of their total consumption expenditures on housing than the rich. This negative relation of housing expenditure shares and income is called Schwabe's law. We study how rising housing cost affect the dynamics of wealth inequality and welfare under the explicit consideration of Schwabe's law. We set up a frictionless two-sectoral macroeconomic model with a housing sector. It is shown that in partial equilibrium (i) rising housing cost may reduce wealth inequality, (ii) this is unaffected by Schwabe's law, and (iii) capturing Schwabe's law amplifies welfare effects. We then study in general equilibrium how the abolishment of zoning regulations affects wealth inequality and welfare through housing costs and other prices. Although the effect on wealth inequality is small, the consequence for welfare is pronounced and asymmetric across the wealth distribution. Wealth poor households benefit from the abolishment of zoning regulations while wealth rich households are worse off. These results are amplified by Schwabe's law. 

Presented at: VfS-Annual Conference (2019), Autumn Forum “Globalization of Real Estate Markets” (2019), 6th Lindau Nobel Laureates Meeting on Economic Sciences (2017), IIPF Doctoral School (2017), PhD Workshop of the German National Academic Foundation (2017); Research Seminars at the University of Pennsylvania (2018), University of Zurich / ETH Zurich (2018) , LMU Munich (2018), University of Konstanz (2018), IWH (2018), Humboldt University of Berlin (2017), Bank of England (2017), University of Fribourg (2017), MCC Berlin (2017)


Bubble-Driven Business Cycles [working paper, slides]

Pronounced and persistent fluctuations in aggregate wealth and real activity - boom-bust episodes - have become more prevalent in recent history. In this paper I provide a quantitative explanation for such boom-bust episodes that is based on rational bubbles. To this end, I set up an overlapping generations model with many generations, financial frictions, aggregate uncertainty and rational bubbles. The calibrated model generates empirically plausible bubble-driven business cycles. I decompose the macroeconomic effect of rational bubbles into several different channels and use the calibrated model to asses their relative strength. The decomposition shows that one particular channel that operates through the creation of bubbles is necessary for plausible bubbles to exist. I then apply the model to replicate the observed series of real output and aggregate wealth during the two recent US boom-bust episodes between 1990 and 2010. By decomposing the model-implied series for aggregate wealth I show that almost all of the fluctuations in aggregate wealth can be explained as a result of stochastic rational bubbles.

Presented at: RES (2020, scheduled), T2M (2020, scheduled), Swiss Macro Workshop 2020, EEA-ESEM 2018, SED 2018, Workshop on Bubbles in Macroeconomics: Recent Developments (2017, CREI, Universitat Pompeu Fabra, Barcelona), RES Symposium of Junior Researchers (2018), SMYE (2017), VfS-Annual Conference (2016), CGDE Doctoral Workshop (2016), PhD Workshop of the German National Academic Foundation (2016); Research Seminars at the Universities of Bonn (2020), St.Gallen (2019), Mannheim (2018), Philadelphia (2018), Augsburg (2017), Norges Bank (2016), IWH (2016, 2018)


Das House Kapital [currently under major revision, slides; earlier version of the paper: IMF Working Paper, CESifo Working Paper, summary on VoxEU], with Volker Grossmann & Thomas Steger

There are, by now, several long term, time series data sets on important housing & macro variables, such as land prices, house prices, and the housing wealth-to-income ratio. However, an appropriate theory that can be employed to think about such data and associated research questions has been lacking. We present a new housing & macro model that is designed specifically to analyze the long term. The calibrated model replicates the historical evolution of housing wealth after World War II and suggests a further considerable increase in the future. It also implies a surge in the land price and the house price.


Pre-PhD Papers


Fiscal Autonomy and Fiscal Sustainability: Subnational Taxation and Public Indebtedness in Contem
porary Spain [CESifo Working Paper], with Bernd Süßmuth


Was bringt uns die große Koalition? Perspektiven der Wirtschaftspolitik [published in Perspektiven der Wirtschaftspolitik (2014); ifo Working Paper], with Björn Kauder & Niklas Potrafke