Min Kim

Job Market Paper

"Financial Literacy, Portfolio Choice, and Wealth Inequality: A General Equilibrium Approach" [Paper] [Slides]

Abstract: I develop a general equilibrium model in which households allocate their wealth to safe and risky assets ("bonds" and "stocks") and accumulate financial literacy to raise their risk-adjusted stock returns. Calibrated to match financial literacy and stock market participation rate of U.S. households, the model demonstrates that a policy subsidizing financial literacy acquisition can increase the short-run stock demand. In equilibrium, however, aggregate capital growth lowers the average equity premium, in turn attenuating the subsidy’s effect. Still, the policy mitigates wealth inequality by generating heterogeneous portfolio rebalancing across the wealth distribution. The middle wealth quartiles acquire more financial literacy with the subsidy and shift their portfolios toward stocks. The top quartile attains their maximum literacy level prior to the subsidy and shifts toward bonds to compensate for lower stock returns. Consequently, the ratio of total wealth held by the top quartile versus the rest of the population decreases.

Work in Progress

"Financial Constraints and Sources of Liquidity: Micro and Macro Implications" (w. Sara Casella and Agustin Diaz Casanueva)