Daniel Albuquerque

Working Papers

Entrepreneurship and the Racial Wealth Gap (with Tomer Ifergane)
Entrepreneurship promotes wealth accumulation. However, Black households face significant barriers, operating fewer and smaller businesses compared to White households. We propose and evaluate a general equilibrium model of entrepreneurship choice and wealth accumulation in which Black households experience adverse distortions as entrepreneurs and workers, both affecting entrepreneurship choice. We discipline the model using U.S. microdata, and find that it matches well the observed racial wealth gap and the correlation between wealth and entrepreneurship. We find that distortions faced by Black entrepreneurs are the key factor for understanding the average racial wealth gap and play a significant role in determining the median gap. Our analysis also indicates that addressing racial disparities in the U.S. can substantially increase output.

Portfolio Changes and Wealth Inequality Dynamics (new draft coming soon!)
This paper investigates the role of changes in households’ portfolios on the evolution of wealth inequality. First, I show that US households’ portfolio composition has changed between 1989 and 2019. Using an accounting exercise, I quantify that these changes account for 2.4 p.p. of the total 7.8 p.p. increase in the wealth share of the top 1%, mainly due to wealthy households holding a rising amount of high-risk, high-return assets. Second, I analyse whether these changes in portfolios at the top can be caused by changes in income taxation. With an analytical model I show that when taxes fall households shift their portfolio towards high-risk, high-return assets, magnifying the impact of tax rates on wealth inequality. Third, I develop a quantitative model of households’ savings and portfolio choice and analyse the decrease in US tax rate progressivity since 1975. Allowing households to react by changing their portfolio composition amplifies the impact of taxes on the top 1% wealth share by approximately 20% from 1975 to 2019, and by 25% when in the new steady state.