Lucy Msall
(last name pronounced ‘muh-sal’)
I am a PhD candidate in Economics at the University of Chicago’s Booth School of Business and a recent Master of Legal Studies graduate from the University of Chicago Law School.
I am on the 2024-2025 academic job market.
Find my CV here.
My research interests are in Public Economics (especially Taxation), Household Finance & Innovation. Prior to graduate school, I worked as a political campaign staffer, government employee, and NBER Research Assistant.
I can be reached via email at lmsall@chicagobooth.edu
Job Market Paper
Never-Realized Capital Gains with Ole-Andreas Næss
Abstract: Appreciated assets are subject to capital gains tax when sold by their original owner. Yet under policies of “stepped-up basis at inheritance”, many countries forgive this latent tax obligation if the asset is instead transferred, unsold, to the owner’s heir. In the first part of this paper, we create novel data on capital gains in Norway and show that large fractions of top household wealth are in the form of capital gains with latent (i.e., unrealized) capital gains tax liability. Furthermore, much of this capital gain is never taxed: Norway’s stepped-up basis policy exempted around $300 million of capital gains in stock and real estate from taxation each year (an amount equal to 19-25% of yearly taxable gains in stock and real estate). In the second part of the paper, we study investor responses to a reform that moved Norway from a system of stepped-up basis to a system in which heirs inherit their predecessor’s latent capital gains tax obligation when they inherit appreciated assets. Using a difference-in-difference empirical strategy exploiting cross-sectional variation in investors’ unrealized capital gain prior to the reform, we estimate that the removal of step-up precipitated large increases in taxable realizations among highly-appreciated investors. The removal of step-up also affected the composition of inheritance: inherited assets had a lower ratio of capital gain to value following the reform. Overall, we conclude that stepped-up basis has a large effect on investors’ decision to sell appreciated assets and disproportionately benefits the very wealthy.
Working Papers
Consumer-Financed Fiscal Stimulus: Evidence from Digital Coupons in China with Jing Ding, Lei Jiang & Matthew Notowidigdo, Conditionally Accepted at American Economic Review: Insights
Abstract: In 2020, local governments in China began issuing digital coupons to stimulate spending in targeted categories such as restaurants and supermarkets. Using data from a large e-commerce platform and a bunching estimation approach, we find that the coupons caused large increases in spending of 3.1–3.3 yuan per yuan spent by the government. The large spending responses do not come from substitution away from non-targeted spending categories or from short-run intertemporal substitution. To rationalize these results, we develop a dynamic consumption model showing how coupons’ minimum spending thresholds create temporary notches that lead to large spending responses.
Presentations*: NBER SI Public Economics (2023), Becker Friedman Institute China Research Conference (2022)
*Not including presentations by co-authors.
Sex, Drugs, and R&D: Missing Innovation from Regulating Female Enrollment in Clinical Trials with Valerie Michelman
Abstract: Did women’s underrepresentation as research subjects depress female-focused drug innovation in the late 20th century? From 1977-1993, U.S. regulatory guidance was that early-stage drug trials should not enroll pre-menopausal women. This guidance increased development costs and uncertainty for drugs targeting predominantly female diseases. We find that the 1993 removal of this guidance led to a large and sustained increase in female-focused drug patenting: the share of drug patents with a female focus increased 1.5-2 percentage points (38-51%). Our estimates imply 200-268 fewer female-focused drug candidates entered development during the guidance period, 17-58 of which would have been approved but for the exclusionary guidance.
Presentations*: NBER SI Innovation (2022), Eastern Economic Association (2022), University of Nebraska England-Clark Conference (2022), Royal Economic Society (2023)
*Not including presentations by co-author.
Work in Progress
Do Corporate Insiders “Buy-Borrow-Die”? Searching for Individual Tax Avoidance in Public Company Filings
Abstract: To what extent do wealthy individuals avoid taxation by borrowing against appreciated assets? No evidence currently exists on the prevalence of this so-called “buy-borrow-die” strategy, despite widespread speculation that it may be a common practice. In this paper, I attempt to document behavior consistent with the “buy-borrow-die” strategy among a group of taxpayers subject to unusual reporting requirements: executive officers and directors of public companies. I construct novel panel data on the extent to which these company insiders pledge their company shares as collateral, and the length of the use as collateral when it occurs. Pledging is relatively infrequent and has grown more concentrated over time: since 2007, the number of corporate insiders pledging shares has decreased 66% but the dollar amount of all collateralized shares has more than tripled. A few prominent billionaires are responsible for the majority of pledged value and their pledging drives the aggregate trends.
Pre-Doctoral Publications
Decreases In Readmissions Credited To Medicare’s Program To Reduce Hospital Readmissions Have Been Overstated with Christopher Ody, Leemore Dafny, David Grabowski & David Cutler. Health Affairs, January 2019. Vol. 38, Issue 1.
Abstract: Medicare’s Hospital Readmissions Reduction Program (HRRP) has been credited with lowering risk-adjusted readmission rates for targeted conditions at general acute care hospitals. However, these reductions appear to be illusory or overstated. This is because a concurrent change in electronic transaction standards allowed hospitals to document a larger number of diagnoses per claim, which had the effect of reducing risk-adjusted patient readmission rates. Prior studies of the HRRP relied upon control groups’ having lower baseline readmission rates, which could falsely create the appearance that readmission rates are changing more in the treatment than in the control group. Accounting for the revised standards reduced the decline in risk-adjusted readmission rates for targeted conditions by 48 percent. After further adjusting for differences in pre-HRRP readmission rates across samples, we found that declines for targeted conditions at general acute care hospitals were statistically indistinguishable from declines in two control samples. Either the HRRP had no effect on readmissions, or it led to a systemwide reduction in readmissions that was roughly half as large as prior estimates have suggested.
Popular Press Coverage: The New York Times, Chicago Booth Review.