American Economic Review: Insights, vol. 5(1), March 2023, pp. 55-72.
Abstract
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Final draft version
Online appendix
Slides, Oct 2022
We adapt the wage contracting structure in Chari (1983) to a dynamic, balanced-growth setting with recontracting as in Calvo (1983). The resulting wage-rigidity framework dampens income effects in the short run, thus allowing significant responses of hours to aggregate shocks. In reduced form, the model dynamics are similar to that in Jaimovich and Rebelo (2009), with their habit parameter replaced by our probability of wage-contract resetting. That is, if wage contracts are reset frequently, labor supply behaves in accordance with King, Plosser, and Rebelo (1988) preferences, whereas if they are never reset, we obtain the setting in Greenwood, Hercowitz, and Huffman (1988).
Journal of Economic Dynamics and Control, vol. 129, August 2021, 104185.
Abstract
Published version
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Code
Python notebook by Carroll and Velásquez-Giraldo
I introduce a method for simulating aggregate dynamics of heterogeneous-agent models where log permanent income follows a random walk. The idea is to simulate the model using a counterfactual permanent-income-neutral measure which incorporates the effect that permanent income shocks have on macroeconomic aggregates. With the permanent-income-neutral measure, one does not need to keep track of the permanent-income distribution. The permanent-income-neutral measure is both useful for the analytical characterization of aggregate consumption-savings behavior and for simulating numerical models. Furthermore, it is trivial to implement with a few lines of code.
Journal of Economic Inequality, vol 19(2), June 2021, pp. 347-362.
Abstract
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Extending the work of Atkinson et al. (2018), we decompose top-earnings gender disparities into a glass-ceiling coefficient and a top-earnings gender gap. The decomposition uses that both male and female top earnings are Pareto distributed. If interpreting top-earnings gender disparities as caused by a female-specific earnings tax, the top-earnings gender gap and glass-ceiling coefficient measure the tax level and tax progressivity, respectively. Using Danish data on earnings, we show that the top-earnings gender gap and the glass-ceiling coefficient evolve differently across time, the life cycle, and educational groups. In particular, while the top-earnings gender gap has been decreasing in Denmark over the period 1980-2013, the glass-ceiling coefficient has been remarkably stable.
Journal of Monetary Economics, vol. 118, March 2021, pp. 350-365.
Abstract
Published version
Final draft version
In response to an adverse labor-market shock, a calibrated heterogeneous-agent model predicts that aggregate spending on durable goods falls mainly due to the ex-ante increase in income uncertainty caused by higher unemployment risk. In contrast, aggregate spending on nondurable goods falls mainly due to the ex-post income losses associated with realized unemployment spells. When households hold little liquid assets, the nondurable spending response is amplified, whereas the durable spending response is dampened. These differences stem from micro-level adjustment frictions involved in purchases of durable goods. The model is corroborated with evidence from micro survey data.