I will post here some papers and notes on what I am working on. If you are interested or have any comments, please contact me:
cacio 'at'


Entrepreneurship and wealth accumulation

(This research is based, in part, on work supported by the National Science Foundation under Grant No. 0318014.)

Estate taxation, entrepreneurship, and wealth

(with Mariacristina De Nardi)

This paper studies the estate tax and its abolition in a quantitative framework with business investment, borrowing constraints, estate transmission, and wealth inequality. We find that the estate tax has little effect on the saving and investment decisions of small businesses and farms, but does distort the decisions of larger firms, thereby reducing aggregate output and savings. Removing such distortions by eliminating the estate tax does not imply that everyone would be better off. In the case in which other taxes were raised to re-establish fiscal balance, the people at the top of the wealth distribution would experience a large welfare gain, but this would come at the cost of reduced welfare for most of the population.

Wealth inequality: data and models

(with Mariacristina De Nardi)

Entrepreneurship, frictions, and wealth

(with Mariacristina De Nardi)
Journal of Political Economy 106(5), oct 2006, p 835-870.

This paper constructs and calibrates a parsimonious model of occupational choice that allows for entrepreneurial entry, exit, and investment decisions in presence of borrowing constraints. The model fits very well a number of empirical observations, including the observed wealth distribution for entrepreneurs and workers. At the aggregate level, more restrictive borrowing constraints generate less wealth concentration, and reduce average firm size, aggregate capital, and the fraction of entrepreneurs. Voluntary bequests allow some high-ability workers to establish or enlarge an entrepreneurial activity. With accidental bequests only, there would be fewer very large firms, and less aggregate capital and wealth concentration.

Savings and consumption

Wealth accumulation over the life cycle and precautionary savings.

Journal of Business and Economic Statistics, 21(3), july 2003, p. 339-353.

I construct a structural model of wealth accumulation, and estimate its parameters using simulation methods and wealth data from the PSID and the SCF. I use the results to study the importance of precautionary savings. The estimates imply that households save mostly for precautionary purposes early in life, while saving for retirement purposes is relevant only near retirement. I discuss the implications of these results for various questions: the importance of heterogeneity in the discount factor (patience) in explaining the dispersion of wealth, the elasticity of savings to changes in interest rates, the importance of bequest motives.

Interest Elasticity in a Life Cycle Model with Precautionary Savings

AER, Papers and Proceedings, May 2001, 91(2), p. 418-421.

I compute by how much households would increase their wealth in response to an increase in interest rates (eg. lower taxes) in a life cycle model with precautionary savings.

Robustness and pricing with uncertain growth

with Lars Peter Hansen, Thomas Sargent and Noah Williams
Review of Financial Studies, vol 15, n 2, 2002, pp 363-404.

We study how decision makers' concerns about robustness affect prices and quantities in a stochastic growth model. The mean technological growth rate is unobservable, and investors must solve a signal extraction problem. We show that to promote a decision rule that is robust to model misspecification, an investor acts as if a malevolent player threatens to perturb the data generating process. We show that robustness increases the risk prices, and that movements in the risk-return tradeoff are dominated by movements in the growth state probabilities.