Limited Consideration in the Investment Fund Choice
CERGE-EI Working Paper No. 729
3rd prize for Young Economist of the Year 2022 by The Czech Economic Society
Abstract: In contrast to standard investment decisions, choosing an investment fund that acts on behalf of households is a common way of investing for many U.S. households. This paper examines the role of limited consideration in household investment fund choice. I develop the Limited Consideration Model that quantifies the losses from not considering all available investment fund options. The SCF data maximum likelihood estimates statistically reject the standard full consideration Random Utility Model in favor of the proposed Limited Consideration Model. Losses due to limited consideration are significant and heterogeneous across the household wealth. Conditional on wealth, effects of limited consideration are stronger for less financially literate households, suggestive of underlying agent’s choice simplification. These findings suggest that financial education policies may moderate choice simplification in investment fund choice.
Financial Skills and Search in the Mortgage Market, with Marta Cota
CERGE-EI Working Paper No. 780
Financial Literacy Research Award for the Best Submitted Paper, Stanford Financial Education Symposium, 2026
Inaugural Award in Memory of Ashot Mkrtchyan, Central Bank of Armenia, 2024
Abstract: Mortgage rates, refinancing, and delinquency vary across borrowers with similar repayment capacity. In the Survey of Consumer Finances, financial literacy varies widely within underwriting-risk categories and predicts search, pricing, and delinquency. Moving from low to high literacy and search lowers the mortgage rate by about 16 basis points, roughly $8,000 in lifetime interest. We build a mortgage search model with endogenous skills in which skills and search are complementary. Skills lower the cost of search and search raises the return to skill, so small gaps compound into lasting dispersion in mortgage costs and consumption. Cheaper search alone raises delinquency among the least skilled, drawn into homeownership unable to manage a mortgage. Financial education builds the skills they lack and reverses this, and together they exceed the sum of their parts. Because search and skills are complements, a more digital mortgage market raises the return to financial education rather than removing the need for it.
Fiscal Multipliers, Tax Structures, and Public Debt in a HANK Model, with Othman Bouabdallah and Pascal Jacquinot
Bank of Portugal Working Paper w202508
Abstract: We develop a two-asset Heterogeneous Agent New Keynesian (HANK) model with a rich fiscal block—featuring progressive income taxes, dividend taxes, consumption taxes, and lump-sum transfers—calibrated to U.S. household balance sheet data. We establish three results. First, the choice of financing instrument generates a threefold spread in multipliers: from 0.43 under consumption-tax financing to 1.34 under debt financing with transfer-based repayment, driven by the differential incidence of each instrument on liquidity-constrained households with high marginal propensities to consume. Second, the relationship between fiscal multipliers and the debt-to-GDP ratio is non-monotonic: effectiveness peaks at moderate debt levels and declines with further indebtedness, arising from a nonlinear interaction between a household distribution channel and a portfolio crowding-out channel that neither representative-agent (RANK) nor two-agent (TANK) models can replicate. Third, higher income tax progressivity dampens fiscal effectiveness when spending is financed via transfers, and this dampening intensifies with indebtedness. These findings highlight that the fiscal multiplier is a function of the financing instrument, the prevailing debt level, and the degree of tax progressivity—dimensions that standard models cannot capture.
Network Effects in Debt Negotiation , with Marta Cota and Mauro Mastrogiacomo
Suited for the Job: Knowledge Mismatch in Higher Education, with Marta Morazzoni and Alejandro Rabano
Abstract: Digital technologies and the transition to a low-carbon economy are reallocating labor demand across types of knowledge. In this context, we analyze the supply of university fields of study and their effects on welfare and wage inequality. We provide micro-level evidence from Spain on university graduates. We show that field choices reflect both tastes and expected wages, and that labor market returns depend on the match between graduates' field of study and the knowledge required in their occupations. Also, universities do not systematically adjust their seats to labor market trends. We develop a general equilibrium model where students choose fields, universities supply slots across studies and firms demand field-specific knowledge. After calibrating the model to Spain, we explore the aggregate effects of increasing labor demand for digital and green jobs. While wages rise heterogeneously across fields of study, we find that both shocks increase wage inequality.