Minchul Yum

Welcome!

I am an Associate Professor (with tenure) at VCU Dept. of Econ. and a CEPR Research Affiliate. Previously I was an Associate Professor at the Univ. of Southampton from 2023 to 2024 and an Assistant Professor at Mannheim Econ. Dept. from 2015 to 2022.

My research focuses primarily on macroeconomics, and I have received several awards for my work, including Young Scholar Award by KAEA.

Curriculum Vitae (PDF)

♦ Click title to see abstract.

Publications:

"Lifestyle Behaviors and Wealth-Health Gaps in Germany"
(with Lukas Mahler)
Econometrica, 92(5), 2024

Abstract
We document significant gaps in wealth across health status over the life cycle in Germany---a country with a universal healthcare system and negligible out-of-pocket medical expenses. To investigate the underlying sources of these wealth-health gaps, we build a heterogeneous-agent life-cycle model in which health and wealth evolve endogenously. In the model, agents exert efforts to lead a healthy lifestyle, which helps maintain good health status in the future. Effort choices, or lifestyle behaviors, are subject to adjustment costs to capture their habitual nature in the data. We find that our estimated model generates the great majority of the empirical wealth gaps by health and quantify the role of earnings and savings channels through which health affects these gaps. We show that variations in individual health efforts account for around a quarter of the model-generated wealth gaps by health, illustrating their role as an amplification mechanism behind the gaps.
DOI: https://doi.org/10.3982/ECTA20603

Abstract

We document significant gaps in wealth across health status over the life cycle in Germany---a country with a universal healthcare system and negligible out-of-pocket medical expenses. To investigate the underlying sources of these wealth-health gaps, we build a heterogeneous-agent life-cycle model in which health and wealth evolve endogenously. In the model, agents exert efforts to lead a healthy lifestyle, which helps maintain good health status in the future. Effort choices, or lifestyle behaviors, are subject to adjustment costs to capture their habitual nature in the data. We find that our estimated model generates the great majority of the empirical wealth gaps by health and quantify the role of earnings and savings channels through which health affects these gaps. We show that variations in individual health efforts account for around a quarter of the model-generated wealth gaps by health, illustrating their role as an amplification mechanism behind the gaps.

DOI: https://doi.org/10.3982/ECTA20603

[Publisher (Open Access)] / [Working Paper] / [BibTex]

"Status Externalities in Education and Low Birth Rates in Korea"
(with Seongeun Kim and Michèle Tertilt)
American Economic Review, 114(6), 2024

Abstract
East Asians, especially South Koreans, appear to be preoccupied with their offspring's education---most children spend time in expensive private institutes and in cram schools in the evenings and on weekends. At the same time, South Korea currently has the lowest total fertility rate in the world. Motivated by novel empirical evidence on spillovers in private education spending, we propose a theory with status externalities and endogenous fertility that connects these two facts. Using a quantitative heterogeneous-agent model calibrated to Korea, we find that fertility would be 28% higher in the absence of the status externality and that childlessness in the poorest quintile would fall from five to less than one percent. We then explore the effects of various government policies. A pro-natal transfer or an education tax can increase fertility and reduce education spending, with heterogeneous effects across the income distribution. The policy mix that maximizes the current generation's welfare consists of an education tax of 22% and moderate pro-natal transfers. This would raise average fertility by about 11% and decrease education spending by 39%. Although this policy increases the welfare of the current generation, it may not do the same for future generations as it lowers their human capital.
DOI: https://doi.org/10.1257/aer.20220583

Abstract

East Asians, especially South Koreans, appear to be preoccupied with their offspring's education---most children spend time in expensive private institutes and in cram schools in the evenings and on weekends. At the same time, South Korea currently has the lowest total fertility rate in the world. Motivated by novel empirical evidence on spillovers in private education spending, we propose a theory with status externalities and endogenous fertility that connects these two facts. Using a quantitative heterogeneous-agent model calibrated to Korea, we find that fertility would be 28% higher in the absence of the status externality and that childlessness in the poorest quintile would fall from five to less than one percent. We then explore the effects of various government policies. A pro-natal transfer or an education tax can increase fertility and reduce education spending, with heterogeneous effects across the income distribution. The policy mix that maximizes the current generation's welfare consists of an education tax of 22% and moderate pro-natal transfers. This would raise average fertility by about 11% and decrease education spending by 39%. Although this policy increases the welfare of the current generation, it may not do the same for future generations as it lowers their human capital.

DOI: https://doi.org/10.1257/aer.20220583

[Publisher] / [Working Paper] / [BibTex]

"Aggregate and Distributional Effects of School Closure Mitigation Policies: Public versus Private Education"
(with Lukas Mahler)
Economics Letters, 235, 2024

Abstract
Recent studies highlight the adverse effects of school closures in terms of average lifetime income loss, cross-sectional inequality, and intergenerational mobility. We use a simple model of human capital formation to compare two policy instruments that can address these negative consequences: direct public provision, such as through an extension of school time, and the provision of private education subsidies. We demonstrate that the effects of these policies on inequality and mobility depend crucially on the degree of substitutability between private and public inputs in the production of human capital.
DOI: https://doi.org/10.1016/j.econlet.2024.111517

Abstract

Recent studies highlight the adverse effects of school closures in terms of average lifetime income loss, cross-sectional inequality, and intergenerational mobility. We use a simple model of human capital formation to compare two policy instruments that can address these negative consequences: direct public provision, such as through an extension of school time, and the provision of private education subsidies. We demonstrate that the effects of these policies on inequality and mobility depend crucially on the degree of substitutability between private and public inputs in the production of human capital.

DOI: https://doi.org/10.1016/j.econlet.2024.111517

[Publisher (Open Access)] / [Working Paper] / [BibTex]

"Aggregate and Intergenerational Implications of School Closures: A Quantitative Assessment"
(with Youngsoo Jang)
American Economic Journal: Macroeconomics, 16(3), 2024

Abstract
This paper quantitatively investigates the medium- and long-term macroeconomic and distributional consequences of school closures through intergenerational channels. The model economy is a dynastic overlapping generations general equilibrium model in which schools, in the form of public education investments, complement parental investments in producing children's human capital. We find that unexpected school closure shocks have long-lasting adverse effects on macroeconomic aggregates and reduce intergenerational mobility, especially among older children. Higher substitutability between public and private investments induces smaller damages in the aggregate economy and the affected children's lifetime income, while exacerbating negative impacts on intergenerational mobility and inequality.
DOI: https://doi.org/10.1257/mac.20200442

Abstract

This paper quantitatively investigates the medium- and long-term macroeconomic and distributional consequences of school closures through intergenerational channels. The model economy is a dynastic overlapping generations general equilibrium model in which schools, in the form of public education investments, complement parental investments in producing children's human capital. We find that unexpected school closure shocks have long-lasting adverse effects on macroeconomic aggregates and reduce intergenerational mobility, especially among older children. Higher substitutability between public and private investments induces smaller damages in the aggregate economy and the affected children's lifetime income, while exacerbating negative impacts on intergenerational mobility and inequality.

DOI: https://doi.org/10.1257/mac.20200442

[Publisher] / [Working Paper] / [BibTex]

"Frisch Elasticities in a Model of Indivisible Labor Supply with Endogenous Workweek Length"
Scandinavian Journal of Economics, 126(1), 2024

Abstract
This paper provides an extension of the classical indivisible labor supply model where a large macro Frisch elasticity is reconciled with a small micro counterpart. Households take as given state-dependent hours per worker, shaped by a nonlinear mapping from hours worked to labor services and employment frictions, and make intertemporal labor supply decisions. In the standard indivisible labor supply model, aggregate fluctuations are independent of the individual preference parameter that governs the intensive margin elasticity. In my model, however, they are connected through the extensive margin whose elasticity is empirically reasonable and is shaped by the individual preference parameter.
DOI: https://doi.org/10.1111/sjoe.12544

Abstract

This paper provides an extension of the classical indivisible labor supply model where a large macro Frisch elasticity is reconciled with a small micro counterpart. Households take as given state-dependent hours per worker, shaped by a nonlinear mapping from hours worked to labor services and employment frictions, and make intertemporal labor supply decisions. In the standard indivisible labor supply model, aggregate fluctuations are independent of the individual preference parameter that governs the intensive margin elasticity. In my model, however, they are connected through the extensive margin whose elasticity is empirically reasonable and is shaped by the individual preference parameter.

DOI: https://doi.org/10.1111/sjoe.12544

[Publisher (Open Access)] / [Working Paper] / [BibTex]

"Tax-and-Transfer Progressivity and Business Cycles"
(with Youngsoo Jang and Takeki Sunakawa)
Quantitative Economics, 14(4), 2023

Abstract
This paper studies how tax-and-transfer progressivity influences aggregate fluctuations when interacting with household heterogeneity. Using a simple static model of the extensive margin labor supply, we analytically characterize how a degree of progressivity influences differential labor supply responses to aggregate conditions across heterogeneous households. We then build a quantitative dynamic general equilibrium model with both idiosyncratic and aggregate productivity shocks and show that it delivers moderately procyclical average labor productivity and a large cyclical volatility of aggregate hours relative to output. Our quantitative exercises suggest that progressivity at the bottom of the income distribution shaped by the phasing out of transfers is key for these findings. Finally, we provide suggestive empirical evidence on the heterogeneity of employment responses across the wage distribution.
DOI: https://doi.org/10.3982/QE1568

Abstract

This paper studies how tax-and-transfer progressivity influences aggregate fluctuations when interacting with household heterogeneity. Using a simple static model of the extensive margin labor supply, we analytically characterize how a degree of progressivity influences differential labor supply responses to aggregate conditions across heterogeneous households. We then build a quantitative dynamic general equilibrium model with both idiosyncratic and aggregate productivity shocks and show that it delivers moderately procyclical average labor productivity and a large cyclical volatility of aggregate hours relative to output. Our quantitative exercises suggest that progressivity at the bottom of the income distribution shaped by the phasing out of transfers is key for these findings. Finally, we provide suggestive empirical evidence on the heterogeneity of employment responses across the wage distribution.

DOI: https://doi.org/10.3982/QE1568

[Publisher (Open Access)] / [Working Paper] / [BibTex]

"Parental Time Investment and Intergenerational Mobility"
International Economic Review, 64(1), 2023

Abstract
This paper constructs an overlapping generations general equilibrium model to explore the extent to which heterogeneity in time investment shapes intergenerational mobility of lifetime income. The calibrated model successfully accounts for untargeted distributional aspects of income mobility, which are captured in the income quintile transition matrix. Counterfactual exercises show that removing heterogeneity in parental time investment reduces intergenerational persistence by around 7-8% for early childhood but only marginally in later childhood. Since parental time and monetary investments are poor substitutes for human capital development in early childhood, parental time investment during this period serves as a mechanism that amplifies the transmission of the parents' economic status to their children. Policy experiments find that an asset-tested subsidy for parental monetary investments in early childhood can raise intergenerational mobility in a cost-effective way, though it reduces mobility substantially if given to parents with older school-aged children.
DOI: https://doi.org/10.1111/iere.12602

Abstract

This paper constructs an overlapping generations general equilibrium model to explore the extent to which heterogeneity in time investment shapes intergenerational mobility of lifetime income. The calibrated model successfully accounts for untargeted distributional aspects of income mobility, which are captured in the income quintile transition matrix. Counterfactual exercises show that removing heterogeneity in parental time investment reduces intergenerational persistence by around 7-8% for early childhood but only marginally in later childhood. Since parental time and monetary investments are poor substitutes for human capital development in early childhood, parental time investment during this period serves as a mechanism that amplifies the transmission of the parents' economic status to their children. Policy experiments find that an asset-tested subsidy for parental monetary investments in early childhood can raise intergenerational mobility in a cost-effective way, though it reduces mobility substantially if given to parents with older school-aged children.

DOI: https://doi.org/10.1111/iere.12602

[Publisher (Open Access)] / [Working Paper] / [BibTex]

"Nonlinear Occupations and Female Labor Supply Over Time"
(with Youngsoo Jang)
Review of Economic Dynamics, 46, 2022

Abstract
Long hours worked associated with higher hourly wages are common to many occupations, known as nonlinear occupations. Over the last four decades, both the share of workers in nonlinear occupations and their relative wage premium have been increasing. Females in particular have been facing rising experience premiums, especially in these types of occupations. We quantitatively explore how these changes have affected the female labor supply over time using a quantitative, dynamic general equilibrium model of occupational choice and labor supply at both the extensive and intensive margins. Our decomposition analysis finds that rising experience premiums are important in explaining the intensive margin of female labor supply, which has continued to increase even in the most recent period. Meanwhile, technical changes biased toward nonlinear occupations help to explain recent stagnating female employment rates. Finally, a counterfactual experiment suggests that, if the barrier aspects of nonlinearities had instead gradually vanished, female employment over this same time period would have been considerably higher at the expense of significantly lower labor supplies at the intensive margin.
DOI: https://doi.org/10.1016/j.red.2021.07.004

Abstract

Long hours worked associated with higher hourly wages are common to many occupations, known as nonlinear occupations. Over the last four decades, both the share of workers in nonlinear occupations and their relative wage premium have been increasing. Females in particular have been facing rising experience premiums, especially in these types of occupations. We quantitatively explore how these changes have affected the female labor supply over time using a quantitative, dynamic general equilibrium model of occupational choice and labor supply at both the extensive and intensive margins. Our decomposition analysis finds that rising experience premiums are important in explaining the intensive margin of female labor supply, which has continued to increase even in the most recent period. Meanwhile, technical changes biased toward nonlinear occupations help to explain recent stagnating female employment rates. Finally, a counterfactual experiment suggests that, if the barrier aspects of nonlinearities had instead gradually vanished, female employment over this same time period would have been considerably higher at the expense of significantly lower labor supplies at the intensive margin.

DOI: https://doi.org/10.1016/j.red.2021.07.004

[Publisher] / [Working Paper] / [BibTex]

"Model Selection for Panel Data Models with Fixed Effects: A Simulation Study"
Applied Economics Letters, 29(19), 2022

Abstract
This study considers model selection criteria, such as the Akaike's Information Criterion (AIC), the corrected Akaike's Information Criterion (AICc), and the Bayesian Information Criterion (BIC), for panel data models with fixed effects. Applying these information criteria to fixed effects panel models is not a trivial matter due to the incidental parameter problem that might adversely affect their practical performance, especially when it comes to short panel data. Monte Carlo experiments suggest that the information criteria are quite successful in selecting the true model. In particular, the AICc and the AIC operate successfully unless a time dimension is extremely small.
DOI: https://dx.doi.org/10.1080/13504851.2021.1962505

Abstract

This study considers model selection criteria, such as the Akaike's Information Criterion (AIC), the corrected Akaike's Information Criterion (AICc), and the Bayesian Information Criterion (BIC), for panel data models with fixed effects. Applying these information criteria to fixed effects panel models is not a trivial matter due to the incidental parameter problem that might adversely affect their practical performance, especially when it comes to short panel data. Monte Carlo experiments suggest that the information criteria are quite successful in selecting the true model. In particular, the AICc and the AIC operate successfully unless a time dimension is extremely small.

DOI: https://dx.doi.org/10.1080/13504851.2021.1962505

[Publisher] / [Working Paper] / [BibTex]

"General Equilibrium Feedback Regarding the Employment Effects of Labor Taxes"
Macroeconomic Dynamics, 24(8), 2020

Abstract
A higher labor tax rate increases the equilibrium real interest rate and reduces the equilibrium wage in a heterogeneous-agent model with endogenous savings and indivisible labor supply decisions. I show that these general equilibrium (GE) adjustments, in particular of the real interest rate, reinforce the negative employment impact of higher labor taxes. However, the representative-agent version of the model, which generates similar aggregate employment responses to labor tax changes, implies that GE feedback is neutral. The cross-country panel data reveal that the negative association between labor tax rates and the extensive margin labor supply is significantly and robustly weaker in small open economies where the interest rate is less tightly linked to domestic circumstances. This empirical evidence supports the transmission mechanism of labor tax changes for employment in the heterogeneous-agent model.
DOI: https://doi.org/10.1017/S1365100519000087

Abstract

A higher labor tax rate increases the equilibrium real interest rate and reduces the equilibrium wage in a heterogeneous-agent model with endogenous savings and indivisible labor supply decisions. I show that these general equilibrium (GE) adjustments, in particular of the real interest rate, reinforce the negative employment impact of higher labor taxes. However, the representative-agent version of the model, which generates similar aggregate employment responses to labor tax changes, implies that GE feedback is neutral. The cross-country panel data reveal that the negative association between labor tax rates and the extensive margin labor supply is significantly and robustly weaker in small open economies where the interest rate is less tightly linked to domestic circumstances. This empirical evidence supports the transmission mechanism of labor tax changes for employment in the heterogeneous-agent model.

DOI: https://doi.org/10.1017/S1365100519000087

[Publisher (Open Access)] / [Working Paper] / [BibTex]

"On the Distribution of Wealth and Employment"
Review of Economic Dynamics, 30, 2018

Abstract
In the United States, the employment rate is nearly flat across wealth quintiles with the exception of the first quintile. Correlations between wealth and employment are close to zero or moderately positive. However, incomplete markets models with a standard utility function counterfactually generate a strongly negative relationship between wealth and employment. Using a fairly standard incomplete markets model calibrated to match the distribution of wealth, I find that government transfers and capital income taxation increase the (non-targeted) correlations between wealth and employment substantially, bringing the model closer to the data. As the model's fit with the distribution of wealth and employment improves, I find that the precautionary motive of labor supply is mitigated, thereby raising aggregate labor supply elasticities substantially.
DOI: https://doi.org/10.1016/j.red.2018.04.001

Abstract

In the United States, the employment rate is nearly flat across wealth quintiles with the exception of the first quintile. Correlations between wealth and employment are close to zero or moderately positive. However, incomplete markets models with a standard utility function counterfactually generate a strongly negative relationship between wealth and employment. Using a fairly standard incomplete markets model calibrated to match the distribution of wealth, I find that government transfers and capital income taxation increase the (non-targeted) correlations between wealth and employment substantially, bringing the model closer to the data. As the model's fit with the distribution of wealth and employment improves, I find that the precautionary motive of labor supply is mitigated, thereby raising aggregate labor supply elasticities substantially.

DOI: https://doi.org/10.1016/j.red.2018.04.001

[Publisher] / [Working Paper] / [BibTex]

Working Papers:

"Parental Leave Policies, Fertility, and Labor Supply"
(with Daisoon Kim)

Abstract
South Korea has been struggling with both low fertility rates and low female hours worked for several decades. Generous parental leave policies have recently been proposed as a government instrument to raise both. How successful would these policies be in achieving these objectives in a society with high demands for expensive private education and strong social norms about the role of women within households? We address these questions using a quantitative heterogeneous-household life-cycle model in which couples jointly make decisions about fertility, childcare, labor supply, and savings, including parental leave take-up. The model is calibrated to recent Korean cohorts to replicate various patterns of key variables. We find that the more generous parental leave benefits recently implemented can effectively narrow gender gaps in labor markets while moderately raising fertility. We also use the model to highlight the role of underlying factors in understanding the policy effects.

Abstract

South Korea has been struggling with both low fertility rates and low female hours worked for several decades. Generous parental leave policies have recently been proposed as a government instrument to raise both. How successful would these policies be in achieving these objectives in a society with high demands for expensive private education and strong social norms about the role of women within households? We address these questions using a quantitative heterogeneous-household life-cycle model in which couples jointly make decisions about fertility, childcare, labor supply, and savings, including parental leave take-up. The model is calibrated to recent Korean cohorts to replicate various patterns of key variables. We find that the more generous parental leave benefits recently implemented can effectively narrow gender gaps in labor markets while moderately raising fertility. We also use the model to highlight the role of underlying factors in understanding the policy effects.

[Paper (available soon)]

Work in Progress:

"Policy Concerns in an Era of Low Fertility"
(with Lukas Mahler and Michèle Tertilt)

"Understanding Changing Marriage Rates and Living Arrangements in Korea"
(with Seongeun Kim and Serhiy Stepanchuk)

"The Value of Life and Fertility Choices"
(with Youngsoo Jang)

"Intergenerational Mobility, Social Welfare and Optimal Policies"
(with Hitoshi Tsujiyama)

"A Business Cycle Assessment of Joint Taxation of Married Couples"
(with Takeki Sunakawa)

"Progressivity of Pension Systems with Endogenous Health and Life Expectancy"
(with Lukas Mahler)

"Indivisible Labor and the Optimal Progressivity of Tax and Transfers"
(with Dmitry Matveev)