Research

I am a mathematical economist with strong interests in applications. The topics I have worked on include

• the impossibility of canonical macroeconomic models to explain wealth inequality,
• a simple explanation for the saving behavior of the rich that does not rely on ad hoc utility functions,
• a computational algorithm for solving macroeconomic models with realistic wealth distributions,
• simple formula and mathematical foundation for Pareto exponents that arise in random multiplicative processes in Markovian environments,
• verification of the random multiplicative process to explain the spread of COVID-19,
• wealth inequality and stock market returns,
• determination of academic salaries,
• implication of financial development to international capital flows and welfare,
• efficient discretization of non-linear, non-Gaussian Markov processes,
• optimal epidemic control when testing and government enforcement are imperfect,

among others.

Below is the complete publication list. My best papers are indicated with 👍. For papers sorted by topics, please see here.

Refereed research articles

1. “Tuning Parameter-Free Nonparametric Density Estimation from Tabulated Summary Data”, with Ji Hyung Lee, Yuya Sasaki, and Yulong Wang, Journal of Econometrics 238(1):105568 (2024) WP version Code BibTeX
   (Econometrics) Just like what the title says, for example estimation of income distributions from tax returns data.
2. “Robust Comparative Statics for the Elasticity of Intertemporal Substitution”, with Joel P. Flynn and Lawrence D. W. Schmidt, Theoretical Economics 18(1):231-265 (2023) WP version BibTeX
   (Theory) Robust comparative statics for the elasticity of intertemporal substitution; sign- and point-identification of EIS minus 1.
3. 👍”Pareto Extrapolation: An Analytical Framework for Studying Tail Inequality”, with Émilien Gouin-Bonenfant, Quantitative Economics 14(1):201-233 (2023) WP version Code BibTeX
   (Power law, Numerical method, Macro) Analytical framework designed to solve and analyze heterogeneous-agent models that endogenously generate fat-tailed wealth distributions.
4. “Tail Behavior of Stopped Lévy Processes with Markov Modulation”, with Brendan K. Beare and Won-Ki Seo, Econometric Theory 38(5):986-1013 (2022) WP version BibTeX
   (Power law, Theory) Characterize tail behavior of Markov-modulated Lévy processes that are stopped at state-dependent Poisson rates; application to wealth distribution.
5. 👍”Determination of Pareto Exponents in Economic Models Driven by Markov Multiplicative Processes”, with Brendan K. Beare, Econometrica 90(4):1811-1833 (2022) WP version Slides BibTeX
   (Power law, Mathematics) Provide simple formula and mathematical foundation for Pareto exponents of stationary Markov multiplicative processes.
6. “Capital and Labor Income Pareto Exponents across Time and Space”, with Tjeerd de Vries, Review of Income and Wealth 68(4):1058-1078 (2022) LIS Working Paper 794 arXiv Code BibTeX
   (Power law, Empirical) Estimate capital and labor income Pareto exponents across 475 country-year observations and document that capital income inequality is higher than labor income inequality (median Pareto exponents 1.46 and 3.35 respectively) and the two inequalities are uncorrelated, suggesting importance of distinguishing the two.
7. “Unbounded Dynamic Programming via the Q-Transform”, with Qingyin Ma and John Stachurski, Journal of Mathematical Economics 100:102652 (2022) WP version BibTeX
   (Theory) Simple operation that often transforms an unbounded dynamic programming problem into a bounded one.
8. “Asymptotic Linearity of Consumption Functions and Computational Efficiency”, with Qingyin Ma, Journal of Mathematical Economics 98:102562 (2022) WP version Code BibTeX
   (Theory, Numerical method) Prove asymptotic linearity of policy functions when marginal utility is regularly varying; follow-up of Ma & Toda (2021).
9. 👍”Optimal Epidemic Control in Equilibrium with Imperfect Testing and Enforcement”, with Thomas Phelan, Journal of Economic Theory 206:105570 (2022) WP version Slides Code BibTeX
   (Theory) Study a behavioral SIR model with imperfect testing and government enforcement and show that equilibrium action is approximately static efficient in the sense that the laissez faire equilibrium allocation is close to the optimal short-term lockdown policy, implying that short-term lockdown policies are redundant.
10. “The Effect of Social Distancing on the Reach of an Epidemic in Social Networks”, with Gregory Gutin, Tomohiro Hirano, Sung-Ha Hwang, and Philip R. Neary, Journal of Economic Interaction and Coordination 16:629-647 (2021) WP version Code BibTeX
    (Network) Simulation study of the evolution of an epidemic disease on social networks; the effectiveness of social distancing greatly depends on network structure.
11. 👍”A Theory of the Saving Rate of the Rich”, with Qingyin Ma, Journal of Economic Theory 192:105193 (2021) WP version Slides Code BibTeX
    (Theory, Macro) Prove asymptotic linearity of policy functions when preferences are homothetic; show that asymptotic marginal propensities to consume can be zero, implying a large saving rate of the rich.
12. “Data-based Automatic Discretization of Nonparametric Distributions”, Computational Economics 57:1217-1235 (2021) WP version Code BibTeX
    (Numerical method) Automatic discretization method of nonparametric distributions using Gaussian quadrature.
13. 👍”Necessity of Hyperbolic Absolute Risk Aversion for the Concavity of Consumption Functions”, Journal of Mathematical Economics 94:102460 (2021) WP version BibTeX
    (Theory) That HARA utility implies concave consumption functions is well-known, but the converse is also true.
14. “Perov’s Contraction Principle and Dynamic Programming with Stochastic Discounting”, Operations Research Letters 49(5):815-819 (2021) WP version BibTeX
    (Mathematics) Show the usefulness of Perov’s contraction principle (which is a generalization of Banach’s contraction principle) for solving certain dynamic programming problems.
15. “Efficient Minimum Distance Estimation of Pareto Exponent from Top Income Shares”, with Yulong Wang, Journal of Applied Econometrics 36(2):228-243 (2021) WP version Code BibTeX
    (Power law, Econometrics) How to efficiently estimate Pareto exponents when only certain top income shares are observable.
16. “Is Gibrat’s “Economic Inequality” Lognormal?”, with Sherzod Akhundjanov, Empirical Economics 59(5):2071-2091 (2020) Code BibTeX
    (Power law, Empirical) The majority of data sets analyzed by Gibrat and claimed to be lognormal are actually closer to Pareto-type distributions.
17. 👍”On the Emergence of a Power Law in the Distribution of COVID-19 Cases”, with Brendan K. Beare, Physica D: Nonlinear Phenomena 412:132649 (2020) WP version Code BibTeX
    (Power law, Empirical) Size distribution of COVID-19 cases across US counties as of March 2020 obeys the power law; empirical Pareto exponent is consistent with the estimated growth rate and age distributions.
18. “The Income Fluctuation Problem and the Evolution of Wealth”, with Qingyin Ma and John Stachurski, Journal of Economic Theory 187:105003 (2020) WP version Code BibTeX
    (Power law, Theory) Establish existence and uniqueness of a solution to a general income fluctuation problem; characterize tail behavior of stationary wealth distribution.
19. 👍”The Equity Premium and the One Percent”, with Kieran James Walsh, Review of Financial Studies 33(8):3583-3623 (2020) WP version BibTeX
    (Finance, Theory, Empirical) In general equilibrium model with heterogeneous risk aversion and/or beliefs, the wealth distribution predicts excess stock returns, which we confirm in data using estate tax rate change as instrument.
20. “Publications, Citations, Position, and Compensation of Economics Professors”, with Yifei Lyu, Econ Journal Watch 16(2):239-257 (2019) Code BibTeX
    (Empirical) Publications (Top 5/Non-top 5) and job rank explains over 80% of variations in salaries among economics professors in the UC system; no evidence of gender gap.
21. “Securitized Markets, International Capital Flows, and Global Welfare”, with Gregory Phelan, Journal of Financial Economics 131(3):571-592 (2019) WP version Code BibTeX
    (Finance, Theory) With collateral constraints, financial integration may hurt the less constrained country.
22. 👍”An Impossibility Theorem for Wealth in Heterogeneous-agent Models with Limited Heterogeneity”, with John Stachurski, Journal of Economic Theory 182:1-24 (2019) WP version Slides BibTeX Corrigendum
    (Power law, Theory, Macro) Prove the impossibility for the canonical Bewley-Huggett-Aiyagari model to generate heavier-tailed wealth than income.
23. “Wealth Distribution with Random Discount Factors”, Journal of Monetary Economics 104:101-113 (2019) WP version Code BibTeX
    (Power law, Theory, Macro) Formal proof that the Krusell-Smith (1998) random discount factor trick generates power law tails; Pareto exponent is sensitive to the calibration of discount factor process.
24. 👍”Discretizing Nonlinear, Non-Gaussian Markov Processes with Exact Conditional Moments”, with Leland E. Farmer, Quantitative Economics 8(2):651-683 (2017) WP version Matlab code Julia code BibTeX
    (Numerical method, Finance) Approximates Markov processes by finite-state Markov chains using maximum entropy discretization of Tanaka & Toda (2013, 2015); applications to solving asset pricing models.
25. “Growth Effects of Annuities and Government Transfers in Perpetual Youth Models”, with Yoshiyuki Miyoshi, Journal of Mathematical Economics 72:1-6 (2017) Code BibTeX
    (Theory, Macro) In perpetual youth models, introduction of government transfer crowds out annuity market and increases growth.
26. “A Note on the Size Distribution of Consumption: More Double Pareto than Lognormal”, Macroeconomic Dynamics 21(6):1508-1518 (2017) WP version Online appendix Code BibTeX
    (Power law, Empirical) Cross-sectional household consumption is well-approximated by double Pareto-lognormal distribution. Formerly a section of Toda & Walsh (2015).
27. “Huggett Economies with Multiple Stationary Equilibria”, Journal of Economic Dynamics and Control 84:77-90 (2017) WP version Code BibTeX
    (Theory, Macro) Closed-form solution to a Huggett (1993) economy with non-Gaussian VAR(1) dynamics and general examples of multiple stationary equilibria.
28. “Edgeworth Box Economies with Multiple Equilibria”, with Kieran James Walsh, Economic Theory Bulletin 5(1):65-80 (2017) WP version Code BibTeX
    (Theory) Many general examples of multiple equilibria in Edgeworth box economies.
29. “Fat Tails and Spurious Estimation of Consumption-Based Asset Pricing Models”, with Kieran James Walsh, Journal of Applied Econometrics 32(6):1156-1177 (2017) WP version Code BibTeX
    (Power law, Econometrics, Finance) Monte Carlo study of spurious inference caused by power law. Formerly a section of Toda & Walsh (2015).
30. “Discretizing Distributions with Exact Moments: Error Estimate and Convergence Analysis”, with Ken’ichiro Tanaka, SIAM Journal on Numerical Analysis 53(5):2158-2177 (2015) WP version BibTeX
    (Numerical method, Mathematics) Convergence and error analysis of maximum entropy discretization of Tanaka & Toda (2013).
31. “Asset Prices and Efficiency in a Krebs Economy”, Review of Economic Dynamics 18(4):957-978 (2015) WP version BibTeX
    (Theory, Macro, Finance) Asset pricing and optimal taxation in a class of tractable dynamic general equilibrium models. Formerly a section of Toda (2014).
32. “Bayesian General Equilibrium”, Economic Theory 58(2):375-411 (2015) BibTeX
    (Theory) Walrasian equilibrium is a special limiting case of statistical equilibrium. Extension of Toda (2010).
33. 👍”The Double Power Law in Consumption and Implications for Testing Euler Equations”, with Kieran James Walsh, Journal of Political Economy 123(5):1177-1200 (2015) WP version Slides Code BibTeX
    (Power law, Econometrics, Empirical) Power law in cross-sectional household consumption data causes spurious inference.
34. “Incomplete Market Dynamics and Cross-Sectional Distributions”, Journal of Economic Theory 154:310-348 (2014) WP version BibTeX
    (Power law, Theory) Class of tractable dynamic general equilibrium models that generates power law in size distributions. One of my dissertation chapters at Yale.
35. “Radii of the Inscribed and Escribed Spheres of a Simplex”, International Journal of Geometry 3(2):5-13 (2014) BibTeX
    (Mathematics) Generalization to an \(n\)-simplex of the fact that the sum of the reciprocals of the radii of escribed circles of a triangle equals the reciprocal of the radius of the inscribed circle. I obtained those results in 1998 when I was freshman.
36. “Discrete Approximations of Continuous Distributions by Maximum Entropy”, with Ken’ichiro Tanaka, Economics Letters 118(3):445-450 (2013) BibTeX
    (Numerical method) Simple maximum entropy method to discretize probability distributions.
37. “Learning Curve for Paramedic Endotracheal Intubation and Complications”, with Junko Toda and Johji Arakawa, International Journal of Emergency Medicine 6:38 (2013) BibTeX
    (Medicine, Empirical) You need to practice at least 30 times to intubate a patient consistently.
38. “The Impact of Media Reports on the 2008 Outbreak of Hydrogen Sulfide Suicides in Japan”, with Mitsuhiro Nakamura, Hideo Yasunaga, Toru Sugihara, and Tomoaki Imamura, International Journal of Psychiatry in Medicine 44(2):133-140 (2012) BibTeX
    (Medicine, Empirical) The media coverage during the 2008 outbreak of hydrogen sulfide suicides in Japan caused more suicides.
39. “The Double Power Law in Income Distribution: Explanations and Evidence”, Journal of Economic Behavior and Organization 84(1):364-381 (2012) BibTeX
    (Power law, Empirical) A certain mean-reverting income process generates a stationary double Pareto distribution. My third-year empirical paper at Yale.
40. “Income Dynamics with a Stationary Double Pareto Distribution”, Physical Review E 83(4):046122 (2011) BibTeX
    (Power law, Empirical) A certain mean-reverting income process generates a stationary double Pareto distribution. An abridged version of my third-year empirical paper at Yale.
41. “Operator Reverse Monotonicity of the Inverse”, American Mathematical Monthly 118(1):82-83 (2011) BibTeX
    (Mathematics) Simple proof of the equivalence \(A \ge B\) if and only if \(B^{-1} \ge A^{-1}\) for positive definite matrices based on convex conjugate functions.
42. “Existence of a Statistical Equilibrium for an Economy with Endogenous Offer Sets”, Economic Theory 45(3):379-415 (2010) BibTeX
    (Theory) Generalizes Foley’s (1994) statistical equilibrium model when offer sets are endogenous. My master thesis at U of Tokyo. Further generalized in Toda (2015).

Conference proceedings

1. “Error Estimate and Convergence Analysis of Moment-Preserving Discrete Approximations of Continuous Distributions”, with Ken’ichiro Tanaka, in Robert K. Niven, Brendon Brewer, David Paull, Kamran Shafi, Barrie Stokes eds. Bayesian Inference and Maximum Entropy Methods in Science and Engineering, AIP Conference Proceedings 1636:30-36 (2014)
2. “Axiomatization of Maximum Entropy without the Bayes Rule”, in Philip Goyal, Adom Giffin, Kevin H. Knuth, Edward Vrscay eds. Bayesian Inference and Maximum Entropy Methods in Science and Engineering, AIP Conference Proceedings 1443:7-13 (2012)

Other publications

1. “Corrigendum to “Bubbles and Constraints on Debt Accumulation” [J. Econ. Theory 57 (1992) 245–256]”, with Narayana Kocherlakota, Journal of Economic Theory 208:105608 (2023)
2. “Corrigendum to “An Impossibility Theorem for Wealth in Heterogeneous-agent Models with Limited Heterogeneity [Journal of Economic Theory 182 (2019) 1-24]”, with John Stachurski, Journal of Economic Theory 188:105066 (2020)
3. “Susceptible-Infected-Recovered (SIR) Dynamics of COVID-19 and Economic Impact”, Covid Economics, Vetted and Real-Time Papers 1 (2020) arXiv Slides VoxEU Fortune

Working papers

1. “Collateralized Loans, Pooling, and Maximum Leverage”, revise and resubmit at Theoretical Economics PDF [First version 2013/10, last updated 2015/07]
2. “Zipf’s Law: A Microfoundation” PDF [First version 2016/07]
3. “Fixed-\(k\) Tail Regression: New Evidence on Tax and Wealth Inequality from Forbes 400”, with Ji Hyung Lee, Yuya Sasaki, and Yulong Wang PDF [First version 2021/05, last updated 2022/09]
4. “Capital and Labor Income Pareto Exponents in the United States, 1916-2019”, with Ji Hyung Lee, Yuya Sasaki, and Yulong Wang PDF Slides [First version 2022/06]
5. “Incentivizing Hidden Types in Secretary Problem”, with Longjian Li PDF Slides [First version 2022/08]
6. “Leverage, Endogenous Unbalanced Growth, and Asset Price Bubbles”, with Tomohiro Hirano and Ryo Jinnai PDF [First version 2022/11, last updated 2023/07]
7. “Unique Equilibria in Models of Rational Asset Price Bubbles”, with Tomohiro Hirano PDF [First version 2023/03]
8. “Visualizing the Contraction Mapping Theorem”, with James Rauch, Paper Video [First version 2023/03]
9. “A Theory of Rational Housing Bubbles with Phase Transitions”, with Tomohiro Hirano, PDF Slides [First version 2023/03]
10. “Bubble Necessity Theorem”, with Tomohiro Hirano, revise and resubmit at Journal of Political Economy PDF Slides [First version 2023/05]
11. “‘Ergodicity Economics’ is Pseudoscience”, PDF [First version 2023/06]
12. “Unbalanced Growth, Elasticity of Substitution, and Land Overvaluation”, with Tomohiro Hirano, PDF Slides [First version 2023/07]
13. “Linearity of Aggregate Production Functions”, with Christopher Chambers, PDF [First version 2023/09]
14. “Robust Asset-Liability Management”, with Tjeerd de Vries, PDF [First version 2023/10]
15. “Unbounded Markov Dynamic Programming with Weighted Supremum Norm Perov Contractions” PDF [First version 2023/10]
16. “Bubble Economics”, with Tomohiro Hirano, PDF [First version 2023/11]
17. “Optimal Taxation and the Domar-Musgrave Effect”, with Brendan Beare, PDF [First version 2023/11]