2025 Institute Research Conference

The Life-Cycle Dynamics of Wealth Mobility
Richard Audoly, Rory McGee, Sergio Ocampo, and Gonzalo Paz-Pardo

How much do people move up or down the wealth distribution in their lifetime? The authors use 25 years of tax data from Norway to study whether people move, how much they move, and when they move. They find that over 60 percent of the population is not mobile, remaining at the top or bottom of the wealth distribution throughout their lives. Parental wealth is the key predictor of who remains persistently rich or poor. Mobility is driven by the remaining 40 percent, who move within the middle of the distribution. Risers engage in less business activity and instead rely on employment income as they move up the distribution. But the data show that there is substantial wealth mobility over individuals’ lifetimes that does not correspond to income mobility. The researchers conclude that differences in savings rates and investment returns are key to generating the substantial variation in wealth accumulation patterns.

A Theory of How Workers Keep Up With Inflation
Hassan Afrouzi, Andrés Blanco, Andrés Drenik, Erik Hurst

After inflation spiked in 2021, the number of job openings per unemployed person reached record highs. Yet real wages fell sharply and remain below their pre-pandemic trends. The researchers propose a theory of the labor market where workers’ wages do not automatically adjust to accommodate high inflation. In order to keep up with inflation, workers can take steps to renegotiate their wage with their existing firm, search for another job, or simply quit if they find their wages have eroded too much. A burst of inflation thus increases the rate at which workers switch jobs to keep up with inflation but has no effect on the rate at which unemployed people find jobs, leading to a higher vacancy to unemployment ratio while simultaneously lowering real wages. This theory is consistent with survey evidence that suggests that workers perceived welfare losses between 2021 and 2023 despite a hot labor market.

The Determinants of Credit Access in the United States
Trevor Bakker, Eric English, Jamie Fogel, Nathaniel Hendren, Daniel Herbst

Access to affordable credit is widely recognized as a catalyst for economic mobility by allowing households to invest in education or housing and accumulate wealth. To rigorously study barriers to credit, the authors construct a longitudinal dataset linking credit records to demographic and income information. Using this data, the authors document that there are only modest differences in the likelihood of having a credit file among individuals of different races and ethnicities or with different parental incomes. Disparities in credit scores among these groups, however, are very large. These differences in credit scores lead Black individuals and those from low-income families to have less access to credit than other groups. In addition, the authors find that for individuals with the same credit score, loan repayment rates vary with both race and parental income. These differences in repayment patterns emerge shortly after borrowers obtain credit in their early 20s, generally on credit cards and student loans, suggesting that early-life experiences play a role.

Subjective Uncertainty and the Marginal Propensity to Consume
Gizem Koşar, Davide Melcangi

Perceptions of one’s future income and spending needs are a key component of economic theories of what determines households’ savings. Economists have observed that households vary in their marginal propensity to consume—that is, how much they choose to spend of the next dollar they receive. Different marginal propensities to consume (MPCs) between households that appear to have similar characteristics are commonly attributed to different subjective perceptions of labor income uncertainty. Using data from the New York Fed’s Survey of Consumer Expectations, the authors construct measures of how much uncertainty households perceive as well as of their MPCs. They find that MPCs increase with earnings uncertainty for most households but fall at high levels of uncertainty. By asking individuals to imagine hypothetical scenarios, the authors find that varying subjective perceptions of earnings risk do not affect individuals’ MPCs. Not only that, but MPCs are only weakly associated with household wealth. The authors also do not find that other persistent factors, such as work status, gender, or education, explain the variation in the amount of uncertainty perceived by households. This suggests much of the uncertainty perceived by households is driven by latent, unobserved traits. In other words, there might exist “types” of households that differ in their perceived uncertainty.

Dynamic Individuals, Static Neighborhoods: Migration, Earnings Changes, and Concentrated Poverty
Andrew Garin, Ethan Jenkins, Evan Mast, Bryan A. Stuart

Research has shown that exposure to high-poverty neighborhoods has negative long-run consequences for employment, educational outcomes, and health. Using newly available administrative data, the authors show that there is a large amount of migration across neighborhoods, including migration from high-poverty to low-poverty areas. This is partly explained by stage of life: Young people are more likely to live in poorer neighborhoods and move out as they age. People are also more likely to change neighborhoods after a change in their earnings. Importantly, the authors find that earnings growth over 10 years is substantial for residents of every neighborhood type. Because those whose earnings increase move to different neighborhoods, some neighborhoods remain persistently poor over time even while their residents have similar likelihoods of climbing to higher incomes.

The Early Career Researchers’ Workshop will be held Friday, November 14, in person at the Federal Reserve Bank of Minneapolis. This event is an opportunity to provide constructive feedback and networking opportunities to scholars up to eight years post-Ph.D. Attendance will be by invitation only, and the event will not be recorded or posted later. We encourage you to visit participants’ webpages to engage with their scholarship.