Paula Roth is a PhD student at the Department of Economics. Her main interests are micro and macro-economic theory and consumer finance. Her most recent project concerns the effects of income inequality on the behavior of low and middle-income households.
Keywords: inequality public economics
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WORK IN PROGRESS
Risk Sharing and Entrepreneurship – What Drives the Most Innovative Countries?
Joint with Matilda Kilström
Description: The perspective that high inequality and a low degree of risk sharing is important to spur innovative activities is contradicted by the fact that the Scandinavian countries, with relatively low inequality and generous welfare systems, are among the highest ranked countries in terms of innovation. We highlight that the theoretical foundations underlying this view rely on a crucial assumption, which is that effort choice is the key determinant of entrepreneurship, and argue that it is also relevant to consider the occupational choice. We first document some stylized cross country facts about innovation and the welfare state. Then we develop a simple overlapping-generations model to study whether risk sharing can facilitate innovation through entrepreneurial activity by limiting downside risk and affecting selection into entrepreneurship.
Building up Status - Do "Keeping up with the Joneses"-preferences imply a positive relationship between inequality and household debt?
Joint with Elin Molin.
Description: In the last decades, most of the western world has experienced a simultaneous increase in income inequality and household debt-to-GDP. In the United States, it is the low and middle-income households that drives the rise in debt-to-income. This has induced researchers to empirically investigate whether there is a causal relationship between the two trends. Some empirical papers have suggested that income inequality gives rise to higher debt for low and middle-income households through their preference to "Keep up with the Joneses". We make two contributions. First, we show that standard Keeping up with the Joneses utility functions cannot generate this relationship unless one imposes the assumption that the rich are more impatient than the poor. Second, we present an extended version of the keeping up with the Joneses utility function that generate outcomes that are consistent with data, with the magnitude depending on the curvature of the utility function. The main assumption is that status is built up over the life-cycle. This creates an incentive to invest in status in early age, which makes low- and middle-income households borrow more as income inequality increases.
Welfare effects of over-indebtedness
- PhD student in Economics, Uppsala University, August 2013 -
- PhD student in Economics, New York University, September 2015-December 2015
- MSc in Economics, Stockholm School of Economics, August 2010-January 2013
- BSc in Economics and Management, Stockholm School of Economics, August 2007-June 2010
- Teaching Assistant, Intermediate Micro, Uppsala University, 2014-2015
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