Research

Fang Yang

Assistant Professor

Department of Economics, University at Albany

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Papers

· Accounting for Gender Gap in College Attainment (with Suqin Ge)

This version: Feb. 2009

One striking phenomenon in the U.S. labor market is the reversal of the gender gap in college attainment. Females have outnumbered males in college attainment since 1987. We develop a discrete choice model of college decision to study the effects of changes in relative earnings, changes in parental education, and changes in the marriage market on time series observations of college attainment by gender. We find that the increases of parental education and relative earnings between college and high school persons have important effects on the increase in college attainment for both genders, while the decrease of marriage rates is crucial in explaining the reversal of gender gap in college attainment.

· Consumption Over the Life Cycle: How Different is Housing?
forthcoming in Review of Economic Dynamics

Micro data over the life cycle shows two different patterns of consumption of housing and non-housing goods: the consumption profile of non-housing goods is hump-shaped while the consumption profile for housing first increases monotonically and then flattens out. These patterns also hold true at each quartile. This paper develops a quantitative, dynamic general equilibrium model of life cycle behavior, which generates consumption profiles consistent with the observed data. Borrowing constraints are essential in explaining the accumulation of housing assets early in life, while transaction costs are crucial in generating the slow downsizing of the housing assets later in life.

· Accounting for the Heterogeneity in Retirement Wealth

Federal Reserve Bank of Minneapolis Working Paper 638

This paper studies a quantitative dynamic general equilibrium life-cycle model where parents and their children are linked by bequests, both voluntary and accidental, and by the transmission of earnings ability. This model is able to match very well the empirical observation that households with similar lifetime incomes hold very different amounts of wealth at retirement. In the benchmark economy the correlation between retirement wealth and lifetime earnings (0.41) is of the same magnitude as in the data (0.48). The quantitative relevance of income heterogeneity, borrowing constraints and intergenerational links in generating the heterogeneity in retirement wealth is investigated. Income heterogeneity and borrowing constraints are essential in generating the variation in retirement wealth among low lifetime income households, while the existence of intergenerational links is crucial in explaining the heterogeneity in retirement wealth among high lifetime income households.

· How Do Households Portfolios Vary with Age?

This version: March 2006

This paper uses data from the Survey of Consumer Finances to construct synthetic cohorts and to investigate the evolution of the composition of households' housing and non-housing assets along the life cycle in the United States. Cohort effects and rate of return shocks are explicitly taken into account and profiles that abstract from these biases are constructed to measure the empirical importance of each factor. I find that, conditional on age, net worth is very concentrated: the mean is higher than the 3rd quartile wealth at all ages, and non-housing assets are more concentrated than net worth. Household in the 1st quartile holds virtually zero non-housing wealth. Homeownership increases dramatically as households age. Housing assets is more evenly distributed along the life cycle: The mean is lower than the 3rd quartile wealth at all ages. These findings suggest that distinguishing housing from other saving decisions and explicitly modeling market frictions and the effect of taxes may be crucial in understanding households' life time saving choices.

· Policy Reforms, Housing, and Wealth Inequality

This version: May 2006

I develop a quantitative, dynamic general equilibrium model of life cycle behavior to study the effects of several policy reforms on assets composition over the life cycle, wealth distribution and aggregate saving. Privatizing social security increases aggregate saving, decreases overall wealth inequality, and generates large welfare gain, especially for agents with high initial productivity. Lowering down payment encourages income poor households to hold more housing assets and generates a welfare gain for agents with low initial productivity. Lowering transaction costs encourages households to hold more housing assets and generates a welfare gain for agents with all initial productivity.

· Limited Enforcement, Private Information, and Risk Sharing (with Hengjie Ai)

We consider an exchange economy with a continuum of agents, each of whom is subject to idiosyncratic endowment shocks. We study efficient allocations subject to two constraints: limited enforcement of financial contracts, and private information about the predictable component of the future endowment process. In our economy the immiseration result, common in this literature, does not hold, and a nontrivial steady state distribution exists. We calibrate our model to match the basic aggregate moments of the US economy, and find evidence that the efficient allocation implied by our model captures some of the very key features of observed partial risk sharing among households. Such crucial empirical features cannot be explained by existing models of endogenous incomplete markets.

· The Response of Consumption to Income Shocks: Some Empirical Findings from CEX Data (with Hengjie Ai, Work in Progress)

This paper uses microeconomic data from the Consumer Expenditure Survey to investigate the response of household consumption to income shocks. We show that, conditional on aggregate consumption, household consumption depends on the household's own income, thus rejecting the assumption of full risk-sharing. The elasticity of consumption to income is relatively small in the whole sample, consistent with the existing literature. Households respond more to negative income shocks than positive income shocks. We also find that the elasticity is hump-shaped:  Households in the middle income deciles have a much higher elasticity than households at the bottom and at the top deciles. This pattern holds true when we look at households in different age groups and different education groups.

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