Topic: The Welfare and Distributional Effects of Fiscal Uncertainty: a Quantitative Evaluation

Speaker: Jinhui Bai, Associate Professor of Economics, Washington State University

Date: November 27th (Fri.)

Time: 10:00-11:30am

Location: Building 4, Room 102

Language: English

Abstract:

This study explores the welfare and distributional effects of fiscal uncertainty using a neoclassical stochastic growth model with incomplete markets. In our model, households face uninsurable idiosyncratic risks in their labor income and discount factor processes, and we allow aggregate uncertainty to arise from both productivity and government purchases shocks. We calibrate our model to key features of the U.S. economy, before eliminating government purchases shocks. We then evaluate the distributional consequences of the elimination of fiscal uncertainty and find that, in our baseline case, welfare gains decline with private wealth holdings.

About the speaker:

Jinhui Bai is the Associate Professor of Finance at School of Economics Sciences, Washington State University. He received a B.A. from Renmin University of China in 1998, and a M.A. in Economics from Peking and a Ph.D. in Economics from Yale University. His research fields are macroeconomics and political economy and economics theory. His papers have appeared in Review of Economic Studies, International Economic Review, Review of Economic Dynamics and other leading economics journals.