Publications

“Dominated pension investments: the role of search frictions and unawareness”
Accepted, AEJ: Applied
With Louise Lorentzon

We conduct a large-scale field experiment in the Swedish pension system to examine to what extent information and search frictions explain dominated high-fee index fund choices. Three findings stand out: (i) Letters that increase awareness of a dominated choice and reduce search costs of finding the dominating alternative improve savers’ investment choices. (ii) While the average effects are positive, a majority of investors are unresponsive to information that essentially removes search costs. The inertia holds across expected gains, rejecting models with fixed adjustment costs. (iii) Lack of awareness and search costs account for at most 45 percent of dominated choices.

“Winners and Losers from Property Taxation”
Forthcoming, Quantitative Economics
With Kasper Kragh Balke and Markus Karlman

This paper considers optimal taxation of housing capital. To this end, we employ a life-cycle model calibrated to the U.S. economy, where asset holdings and labor productivity vary across households, and tax reforms lead to changes in house and rental prices, interest rates, and wages. We find that the optimal property tax in the long run is considerably higher than today, partly due to the relatively inelastic demand and supply of housing. A higher property tax also reduces house prices and causes a reallocation from housing to business capital, which in turn decreases interest rates and increases wages. These equilibrium effects allow for an improved consumption smoothing over the life cycle. However, most current households would incur substantial welfare losses from an implementation of a higher property tax, since house prices fall, and a majority own their home. Hence, when accounting for transitional dynamics, it is not clear that a higher property tax is feasible or preferred.

“The effects of monetary policy through housing and mortgage choices on aggregate demand”
Quantitative Economics 2025, Vol. 16, Iss. 2: 659-703
(Winner of the UniCredit Foundation Best Paper Award at VMACS CopenhagenMacro Days)

Housing and mortgage choices are among the largest financial decisions households make and they substantially impact households’ liquidity. This paper explores how monetary policy affects aggregate demand by influencing these portfolio choices. To quantify this channel, I build a heterogeneous-agent life-cycle model with long-term mortgages and endogenous house prices. I find that, although only a small fraction of households adjust their housing and mortgage holdings in response to an expansionary monetary policy shock, these households account for over 50 percent of the increase in aggregate demand. Mortgage refinancing explains approximately four-fifths of the contribution, whereas adjusted housing choices account for one-fifth—uncovering a new transmission channel. I also show that the different pass-through of the policy rate to short and long mortgage rates drives the difference in the house-price and aggregate demand response between economies with adjustable-rate as compared to fixed-rate mortgages.

“Costly reversals of bad policies: the case of the mortgage interest deduction”
Review of Economic Dynamics 2021, Vol. 40: 85-107
With Markus Karlman and Kasper Kragh-Sørensen

This paper measures the welfare effects of removing the mortgage interest deduction under a variety of implementation scenarios. To this end, we build a life-cycle model with heterogeneous households calibrated to the U.S. economy, which features long-term mortgages and costly refinancing. In line with previous research, we find that most households would prefer to be born into an economy without the deductibility. However, when we incorporate transitional dynamics, less than forty percent of households are in favor of a reform and the average welfare effect is negative. This result holds under a number of removal designs.

Working Papers

“Down-payment requirements: Implications for portfolio choice and consumption”
R&R, Review of Economic Studies
With Kasper Kragh Balke and Markus Karlman

This paper studies how down-payment requirements for house purchases affect
households’ saving and housing decisions, and the implications for macroeconomic policy. Using a quantitative model, we find that households not only postpone homeownership when the down-payment constraint is higher, but they also delay when they start saving for the house. We show analytically that this result holds under standard assumptions for households’ earnings and preferences. The changes to saving and portfolio choices affect the distribution of liquidity-constrained households, which in turn impacts aggregate responses to policy. Specifically, the cash-flow channel of monetary policy is reduced, and it becomes increasingly important to direct fiscal transfers at low-income households to achieve the largest consumption response. We also find that a stricter down-payment requirement is associated with substantial welfare costs, especially for high-income households.

“The Inflation Tilt Effect”
With Sigmund Ellingsrud and Gisle Natvik

When higher inflation pushes nominal interest rates up, mortgage payment schedules become more front-loaded in real terms. This is the inflation tilt effect. Using Norwegian micro data, we quantify the magnitude and distribution of tilt effects within mortgage contracts across households, and estimate the extent to which they impact saving. Tilt effects are large among young and middle-aged households with high debt and high income. Tilt effects pass through to household saving. Our baseline average estimate is 0.7, meaning that for every dollar that inflation increases the scheduled current mortgage payment, households increase their saving by 70 cents. We assess the welfare consequences of inflation due to tilt effects within a heterogeneous-household life-cycle model with adjustable-rate mortgages and borrowing constraints. The model implies that constrained households with large mortgages suffer significant welfare losses from higher inflation as it forces them to save more.

Norwegian/Swedish Publications

“Hvordan virker utlånsforskriften?”
Samfunnsøkonomen Utgave 2, 2024
With Jeanette Fjære-Lindkjenn, Knut Are Astveit, Markus Karlman, Ragnar Juelsrud, and Ella Getz Wold

“Makrotillsynsregleringar och stabiliseringspolitik”
Ekonomisk Debatt nr 3, 2024

Work in Progress

“Climate, agriculture, and trade”
With Timo Boppart, John Hassler, Per Krusell, Conny Olovsson, Yimei Zou