Faculty and research

Centre for Household Finance and Macroeconomic Research (HOFIMAR)

We promote research on households’ financial behavior and macroeconomics.


  • Serdar Ozkan, Joachim Hubmer, Sergio Salgado, Elin Halvorsen

    Why Are the Wealthiest So Wealthy? A Longitudinal Empirical Investigation

    Working Paper Series No 7/2023

    Abstract: We use Norwegian administrative panel data on wealth and income between 1993 and 2015 to study lifecycle wealth dynamics, focusing on the wealthiest households. On average, the wealthiest start their lives substantially richer than other households in the same cohort, own mostly private equity, earn higher returns, derive most of their income from dividends and capital gains, and save at higher rates. At age 50, the excess wealth of the top 0.1% group relative to mid-wealth households is accounted for in about equal terms by higher saving rates (34%), higher initial wealth (32%), and higher returns (27%), while higher labor income (5%) and inheritances (1%) account for the small residual. There is significant heterogeneity among the wealthiest: one-fourth of them—which we dub the “New Money”—start with negative wealth but experience rapid wealth growth early in life. Relative to the quartile of top owners that already started their life rich—the “Old Money”—the New Money are characterized by even higher saving rates and returns and also by higher labor income. Their excess wealth is mainly explained by higher saving rates (46%), higher returns (34%), and higher labor income (16%).

  • Ragnar E. Juelsrud and Ella Getz Wold

    The importance of unemployment risk for individual savings

    HOFIMAR Working Paper Series No 6/2023

    Abstract: In this paper we use a novel natural experiment and Norwegian tax data to quantify the causal impact of unemployment risk on individual savings. We show theoretically that higher unemployment risk increases liquid savings and has an ambiguous impact on illiquid savings in partial equilibrium. In line with the model predictions, our empirical results confirm that a one percentage point increase in unemployment rates increases liquid savings by 1.3 percent in the cross-section. Reassuringly, this effect is driven by low-tenured workers, who face the highest increase in risk. Illiquid savings remain unaffected, implying an increase in the overall liquidity of individual saving portfolios. Using two independent approaches to quantify the overall importance of the unemployment risk channel in explaining saving dynamics during recessions, we find that at least 80% of the recession-induced increase in liquid savings can be explained by higher unemployment risk.

  • Andreas Fagereng, Magnus A. H. Gulbrandsen, Martin B. Holm and Gisle J. Natvik

    How Does Monetary Policy Affect Household Indebtedness?

    HOFIMAR Working Paper Series No 5/2023

    Abstract: Growth in household debt-to-income ratios can be attributed to nominal debt changes or mechanical “Fisher effects” from interest income and expenses, real income growth, and inflation. With microdata covering the universe of Norwegian households for more than 20 years, we decompose the importance of these channels for how debt-to income ratios evolve over time and respond to monetary policy shocks. On average, debt changes outsize Fisher effects, and they are due to households who move. But among highly leveraged households, Fisher effects dominate. After interest rate hikes, debt changes and Fisher effects pull in opposite directions. The former dominate so that debt-to-income ratios fall. This pattern holds across sub-groups, even among highly indebted households. Hence, changes in borrowing and repayment dominate mechanical effects via nominal income growth in the transmission of monetary policy shocks to debt-to-income ratios.

  • Knut Are Aastveit, Ragnar Enger Juelsrud and Ella Getz Wold

    The leverage-liquidity trade-of mortgage regulation

    HOFIMAR Working Paper Series No 4/2023

    Abstract: We evaluate the impact of loan-to-value restrictions on household financial vulnerability. Using Norwegian tax data, we first document a beneficial leverage effect, in which households respond to the regulation by reducing house purchase probabilities, debt and interest expenses. Second, we document a detrimental and persistent liquidity effect working through higher down payment requirements. We further show that households which, due to the regulation, hold less liquid assets also have larger consumption falls upon unemployment. Finally, we provide back of the envelope calculations on the net impact of lower leverage and lower liquidity on household consumption volatility. We find that the beneficial impact of lower leverage is outweighed by the detrimental impact of lower liquidity, suggesting that LTV restrictions are not successful in reducing consumption volatility at the household level.

  • Annika Bacher

    The Gender Investment Gap over the Life-Cycle

    HOFIMAR Working Paper Series No 3/2023

    Abstract: Single women hold less risky financial portfolios than single men. This paper analyzes the determinants of the “gender investment gap” based on a structural life-cycle framework. The model is able to rationalize the investment gap without introducing gender heterogeneity in preferences (e.g. in risk aversion). Rather, lower income levels and larger household sizes of single women are the main determinants for explaining the gap. Importantly, expectations about future realizations of both variables (that cannot easily be controlled for in regressions) drive most of the investment differences for young households whereas heterogeneity in observable characteristics explains the gap later in life.

  • Andreas Fagereng, Matthieu Gomez, Emilien GouinBonenfant, Martin Holm, Benjamin Moll and Gisle Natvik

    Asset-Price Redistribution

    HOFIMAR Working Paper Series No 2/2023

    Abstract: Over the last several decades, there has been a large increase in asset valuations across many asset classes. These rising valuations had important effects on the distribution of wealth. However, little is known regarding their effect on the distribution of welfare. To make progress on this question, we derive a sufficient statistic for the (money metric) welfare effect of a change in asset valuations, which depends on the present value of an individual’s net asset sales: rising asset prices benefit prospective sellers and harm prospective buyers. We estimate this quantity using panel microdata covering the universe of financial transactions in Norway from 1994 to 2019. We find that rising asset valuations had large redistributive effects: they redistributed from the young towards the old and from the poor towards the wealthy.

  • Iván Alfaro, Nicholas Bloom and Xiaoji Lin

    The Finance Uncertainty Multiplier

    HOFIMAR Working Paper Series No 1/2023

    Abstract: We show how real and financial frictions amplify, prolong and propagate the negative impact of uncertainty shocks. We first use a novel instrumentation strategy to address endogeneity in estimating the impact of uncertainty by exploiting differential firm exposure to exchange rate, policy, and energy price volatility in a panel of US firms. Using common proxies for financial constraints we show that ex-ante financially constrained firms cut their investment even more than unconstrained firms following an uncertainty shock. We then build a general equilibrium heterogeneous firms model with real and financial frictions, finding financial frictions: i) amplify uncertainty shocks by doubling their impact on output; ii) increase persistence by extending the duration of the drop by 50%; and iii) propagate uncertainty shocks by spreading their impact onto financial variables. These results highlight why in periods of greater financial frictions uncertainty can be particularly damaging.