The Returns on Human and Financial Wealth: Cash Flows and Discount Rates

点击翻译按钮获取中文摘要

The volatility of the returns on non-human capital is puzzling for two reasons: the volatility of the returns on non-human capital seems inconsistent aggregate consumption, and standard, reasonably calibrated models cannot generate enough volatility in the price of installed, non-human capital. This project has a "consumption growth accounting" part, that addresses the first observation, and a theory part, that addresses the second one. It intends to demonstrate that the correct measurement of the returns on human capital can close at least part of the distance between the model and the data. The first part of the project uses consumption data to learn about the returns on human capital. Taking the returns on non-human capital as given, it shows that the standard theory puts tight restrictions on the joint distribution of aggregate consumption and capital returns in the data. These restrictions are used to learn about the returns on human capital. This consumption growth accounting exercise reveals that the current and future expected returns on both types of capital have to be negatively correlated. The second part of the project tries to understand what explains the volatility and the correlation of the returns on human and non-human capital. It develops a model in which good news for current and future growth of the cash flows accruing to the owners of non-human capital is bad news for the cash flows accruing to the owners of human capital, matching a key feature of US data. In the model, a larger share of the returns on intangible capital flows to the skilled workers who accumulate it when there is substantial job reallocation, at the expense of the owners of the non-human capital stock.Broader Impact: The volatility of the measured returns on capital presents a major challenge to the workhorse models in modern business cycle theory and asset pricing. This project offers a new perspective on the measurement and modeling of human capital returns. The returns on human capital are of independent interest to researchers in macroeconomics, finance, and labor economics, and bringing consumption data to bear on it may prove to be an important innovation.