The Untaxables? Effective Capital Gains Taxes with Diversified PortfoliosPublic FinanceCapital Gains Taxation
single authored (Primary Job Market Paper) • last update: October 13, 2026
Conferences: ESEM/EEA (Dublin, 2026); LSE Stone Center opening (2026, planned). Seminar presentations: UZH, LSE, Bocconi, PSE, Paris Economics of Taxation Workshop
Abstract Working Paper
Capital gains are central to the taxation of the very rich, yet realization taxes allow investors to defer payment. Despite its policy relevance, a measure of long-run effective taxation capturing optimal deferral in diversified portfolios has been missing because of technical challenges. I close this gap with a model that represents portfolios by distributions of embedded gains and losses. It solves a dynamic trading problem in which today's sales change tomorrow's tax opportunities. I express the consumption benefits of tax-optimal trading as effective tax rates and equivalent returns. I establish when harvesting losses and selling the least appreciated positions is optimal over any horizon. Aggregate downside risk can reverse this rule. The calibration matches historical U.S. market conditions and the OECD average capital gains tax rate. A 25-percent tax on realized gains and dividends sustains the same constant real consumption indefinitely as an accrual tax of about 14 percent. At the same statutory rate, an accrual-taxed portfolio needs 74 additional basis points of expected annual return to match that consumption. A separate cohort calculation yields 49 percent less revenue than accrual taxation at the statutory rate. Continued deferral thus limits the revenue and progressivity of realization-based capital gains taxes.
Monopolistically Skewed Business Cycles: On the Origins of Distributional FluctuationsMacroeconomicsMarket Power
with Timo Haber and Niklas Schmitz • last update: October 7, 2026
Conferences: European Winter Meeting ES* (Cyprus, 2025); XAmsterdam (poster) (Amsterdam, 2025); ES Asia Meeting (Main) (C/S/W, Abu Dhabi, 2026); Barcelona Summer Forum (Barcelona, 2026); ESEM/EEA* (Dublin, 2026). Seminar presentations: UZH, De Nederlandsche Bank
Abstract Working Paper Slides
How do aggregate shocks jointly move mean growth, dispersion, and skewness over the business cycle? In U.S. public-firm data, these three moments fluctuate in stable patterns, yet with cross-sectional heterogeneity: larger firms have lower, more stable growth dispersion but substantially larger skewness fluctuations. We explain these cyclical dynamics and their size gradient through heterogeneous exposure and demand curvature. In general homothetic demand systems, a strengthened form of Marshall’s second law makes firms’ equilibrium policies from cost shocks to log real revenue concave, generating skewed growth. Under mild conditions, larger firms have flatter policies with stronger curvature, rationalizing the size gradient. We confirm this empirically by jointly recovering relative policy slopes, curvature, and idiosyncratic volatility across firm sizes from growth variance and skewness dynamics. Firm-specific responses to six independently identified aggregate innovations broadly reproduce the size gradient in growth moments. Using measured firm-level COVID exposures, we further link aggregate shocks to distributional growth asymmetry.
Not-So-Cleaning RecessionsMacroeconomicsFirm Dynamics
with Igli Bajo and Alessandro Ferrari
Conferences: SED Annual Meeting (Copenhagen, 2025); ESADE Macro Meetings* (Barcelona, 2025); 4th workshop on Firm Heterogeneity & Macroeconomics* (Bonn, 2025); Schumpeter@100 Firm Dynamics, Growth, and Heterogeneity* (Bonn, 2026); EAYE Annual Meeting* (2026); SFI PhD Workshop* (2025). Seminar presentations: UZH, Nova SBE*, Crei-UPF*, Bristol*, Oxford*, QMUL*, UCL*, ULB (Bruxelles)* (2026), NBB* (2026), European Commission* (2026)
Abstract Working Paper CEPR version Slides
Recessions are periods in which the least productive firms in the economy exit, and as the economy recovers, they are replaced by new and more productive entrants. These cleansing effects improve the average firm productivity. At the same time, recessions induce a loss of varieties. We show that the long-run welfare effects trade off these two forces. This trade-off is governed by love-of-variety and the elasticity of substitution in aggregate production. If industry output is aggregated with the standard CES aggregator, recessions do not bring about any improvement in GDP and welfare. If the economy features more love-of-variety than CES, the social planner optimally subsidizes economic activity both in steady state and even more so in recessions to avoid firm exit. We use the model and quasi-exogenous variation in demand to estimate love-of-variety. We find it to be significantly higher than implied by CES aggregation, suggesting that even the long-run effects of recessions are negative. Finally, we quantitatively characterize the optimal policy response both along the transition and in the steady state.
The dynastic benefits of early-childhood education: participant benefits and family spilloversEducationIntergenerational Mobility
with Jorge L. Garcia and Duncan Ermini Leaf
Journal of Human Capital 18 (1), 44-73 (2024)
Conferences: 16th IZA & 3rd IZA/CREST Conference on Labor Market Policy Evaluation* (2021).
Abstract Working Paper Journal
We demonstrate the social efficiency of investing in high-quality early-childhood education using newly collected data from the HighScope Perry Preschool Project. The data analyzed are the longest follow-up of any randomized early-childhood education program. Annual observations of participant outcomes up to midlife allow us to provide a cost-benefit analysis without relying on forecasts. Adult outcomes on the participants' children and siblings allow us to quantify spillover benefits. The program generates a benefit-cost ratio of 6.0 (p-value .03). Spillover benefits increase this ratio to 7.5 (p-value = 0.00).
Capital Gains Taxation in Life and DeathPublic FinanceWealth Taxation
with Florian Scheuer
work in progress
Conferences: Taxing Billionaires (PSE, Paris, 2025), Seminar presentations: UZH, SFI
Abstract
End-of-life provisions determine the tax base of capital gains, when assets are bequeathed. Up until today, there existed no quantitative model to simulate the effects of changing end-of-life provisions, which jointly takes into account the reactions of households at two margins: (1) composition of the asset portfolio and (2) total size of the bequeathed estate. We build a novel, unifying framework in which one can simulate the consequences of different end-of-life provisions, bequest taxes and other income taxes simultaneously, thereby surpassing the current state-of-the-art at several margins. We do so by recasting the definition of asset portfolios, which makes the household problem theoretically and quantitatively tractable.
Who Gains from Capital Gains?Public FinanceCapital Gains Taxation
with Moritz Kuhn, Lorenzo Ranaldi, and Florian Scheuer
work in progress