Government Investment Stimulus and Household Balance Sheet Externalities

By Abhishek Bhardwaj and Saptarshi Mukherjee
Cambridge University Press | January 2025

DOI

https://doi.org/10.1017/S0022109024000449

Citation

Bhardwaj A, Mukherjee S. Government Investment Stimulus and Household Balance Sheet Externalities. Journal of Financial and Quantitative Analysis. 2025;60(3):1457-1499. doi:10.1017/S0022109024000449

Copyright

Cambridge University Press, 2025

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Abstract

We document spillover effects of government policies promoting capital investment on household financial choices and wealth accumulation. Using individual-level data on employment outcomes and household balance sheets, we find that increase in accelerated depreciation limits increases the layoff probability of routine workers and reduces their stock share of liquid wealth relative to non-routine workers. Background risk due to the policy is mitigated when workers have access to generous unemployment insurance benefits. Finally, we show that such portfolio rebalancing adversely impacts investment returns and the wealth accumulation of routine workers.

I am an Assistant Professor of Finance at the Indian School of Business. I received my Ph.D. in Finance from the NYU Stern School of Business.

My research examines how financial institutions shape credit allocation, financial stability, and real economic outcomes. I study banking, private equity, and the growing role of non-bank financial institutions in modern financial systems. A second stream of my research examines how firms adapt to climate change and natural disasters, with a focus on employment, investment, and productivity. My research has been published or accepted in leading finance and economics journals, including the Review of Financial Studies, Journal of Political Economy: Macroeconomics, and Journal of Financial and Quantitative Analysis. It has been supported by research grants from organizations including the National Bureau of Economic Research (NBER) and presented at leading academic, policy, and industry forums. I teach corporate finance at the graduate level.

My work sits at the intersection of academia, industry, and public policy. I serve as an Independent Director at Zerodha Trustee Private Limited, where I focus on governance, risk oversight, and regulatory issues arising from the rapid growth of passive investing and retail participation in financial markets. Before academia, I worked at Deutsche Bank, where I was closely involved with financial markets and hedge fund clients.

I believe rigorous academic research can play an important role in informing financial practice and public policy. My research combines large-scale data with modern empirical methods to address questions that matter to regulators, financial institutions, investors, and policymakers. I welcome opportunities to collaborate with researchers, industry practitioners, and public institutions on data-driven research and policy questions.

Abhishek Bhardwaj
Abhishek Bhardwaj