Firm Dynamics, Job Turnover, and Wage Inequality in an
Open Economy (with Kerem Cosar and James Tybout), forthcoming, American
Economic Review
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This paper explores the combined effects of reductions
in trade frictions, tariffs, and .ring costs on firm dynamics, job turnover,
and wage distributions. It uses establishment-level data from Colombia to
estimate an open economy dynamic model that links trade to job flows and wages.
Counterfactual experiments imply that Colombia's integration with global
product markets increased its national income at the expense of higher
unemployment, greater wage inequality and increased firm-level volatility. In
contrast, contemporaneous labor market reforms dampened the increase in
unemployment and aggregate job turnover. The results speak more generally to
the effects of globalization on labor markets.
Managers and Productivity Differences (with Andrii Parkhomenko and Gustavo
Ventura), February 2016
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We document that for a group of high-income countries (i) mean earnings of managers tend to grow faster than for
non managers over the life cycle; (ii) the earnings growth of managers relative
to non managers over the life cycle is positively correlated with output per
worker. We interpret this evidence through the lens of an equilibrium
life-cycle, span-of-control model where managers invest in their skills. We
parameterize this model with U.S. observations on managerial earnings, the
size-distribution of plants and macroeconomic aggregates. We then quantify the
relative importance of
exogenous productivity differences, and the
size-dependent distortions emphasized in the misallocation literature. Our
findings indicate that such distortions are critical to generate the observed
differences in the growth of relative managerial earnings across countries.
Thus, observations on the relative earnings growth of managers become natural
targets to discipline the level of distortions. Distortions that halve the growth
of relative managerial earnings (a move from the U.S. to Italy in our data),
lead to a reduction in managerial quality of 27% and to a reduction in output
of about 7% . more than half of the observed gap between the U.S. and Italy. We
find that cross- country variation in distortions accounts for about 42% of the
cross-country variation in output per worker gap with the U.S.
Family
Economics Writ Large (with Jeremy Greenwood and Guillaume Vandenbroucke),
December 2015
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macroeconomic approach to family economics
Powerful currents have reshaped the structure of
families over the last century. There has been (i) a
dramatic drop in fertility and greater parental investment in children; (ii) a
rise in married female labor-force participation; (iii) a decline in marriage
and a rise in divorce; (iv) a higher degree of assortative
mating; (v) more children living with a single mother; (vi) shifts in social
norms governing premarital sex and married women’s roles in the labor market.
Macroeconomic models explaining these aggregate trends are surveyed. The
relentless flow of technological progress and its role in shaping family life
are stressed.
Heterogeneity and Government
Revenues: Higher
Taxes at the Top? with Martin
Lopez Daneri and Gustavo Ventura, December 2015
We evaluate the effectiveness of a more progressive tax
scheme in raising government revenues. We develop a life-cycle economy with
heterogeneity and endogenous labor supply. Households face a progressive income
tax schedule, mimicking the Federal Income tax, and flat-rate taxes that
capture payroll, state and local taxes and the corporate income tax. We
parameterize this model to reproduce aggregate and cross sectional observations
for the U.S. economy, including the shares of labor income for top earners. We
find that a tilt of the Federal income tax schedule towards high earners leads
to small increases in revenues which are maximized at an effective marginal tax
rate of about 36.6% for the richest 5% of households – in contrast to a 21.6% marginal rate in the benchmark
economy. Maximized revenue from Federal income taxes is only 6.8% higher than
it is in the benchmark economy, while revenues from all sources increase only
by about 0.6%. The room for higher revenues from more progressive taxes is even
lower when average taxes are higher to start with. We conclude that these
policy recommendations are misguided if the aim is to exclusively raise
government revenue.
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Optimal Spatial Taxation: Are
Big Cities Too Small? (with Jan Eeckhout), November 2015
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We analyze the role of optimal income taxation
across different local labor markets. Should labor in large cities be taxed
differently than in small cities? We find that a planner who needs to raise
revenue and is constrained by free mobility of labor across cities does not
choose equal taxes for cities of different sizes. The optimal tax schedule is
location specific and tax differences between large and small cities depends on
the level of government spending and on the concentration of housing wealth.
Our estimates for the US implies higher marginal rates in big cities, but lower
than what is observed. Simulating the US economy under the optimal tax
schedule, there are large effects on population mobility: the fraction of
population in the 5 largest cities grows by 8.0% with 3.5% of the country-wide
population moving to bigger cities. The welfare gains however are smaller.
Aggregate consumption goes up by 1.53%. This is due to the fact that much of
the output gains are spent on the increased costs of housing construction in
bigger cities. Aggregate housing consumption goes down by 1.75%.
Does Marriage Make You Healthier? with
Yuliya Kulikova and Joan Llull, December 2014.
We use the Panel Study of Income
Dynamics (PSID) and the Medical Expenditure Panel Survey (MEPS) to study the relationship
between marriage and health for working-age (20 to 64) individuals. In both
data sets married agents are healthier than unmarried ones, and the health gap
between married and unmarried agents widens by age. After controlling for
observables, a gap of about 12 percentage points in self-reported health
persists for ages 55-59. We estimate the marriage health gap nonparametrically as a function of age. If we allow for
unobserved heterogeneity in innate permanent health, potentially correlated
with timing and likelihood of marriage, we find that the effect of marriage on
health disappears at younger (20-39) ages, while about 6 percentage points
difference between married and unmarried individuals, about half of the total
gap, remains at older (55-59) ages. These results indicate that association
between marriage and health is mainly driven by selection into marriage at
younger ages, while there might be a protective effect of marriage at older
ages. We analyze how selection and protective effects of marriage show up in
the data.
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Gratis" feature on this article (in Spanish)
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(in Spanish)
Childcare Subsidies and Household Labor
Supply with Remzi Kaygusuz and Gustavo
Ventura, June 2014
What would be the aggregate effects of adopting a more generous
and universal childcare subsidy program in the U.S.? We answer this question in
a life-cycle equilibrium model with joint labor-supply decisions of married
households along extensive and intensive margins, heterogeneity in terms of the
presence of children across households and skill losses of females associated
to non participation. We find that subsidies have substantial effects on female
labor supply, that are largest at the bottom of the skill distribution. Fully
subsidized childcare available to all households leads to long-run increases in
the participation of married females and total hours worked by about 10.1% and
1.0%, respectively. There are large differences across households in welfare
gains, as a small number of households - poorer households with children - gain
significantly while others lose. Welfare gains of newborn households amount to
1.9%. Our findings are robust to differences among households in fertility and
childcare expenditures.
Marital Instability and the Distribution of
Wealth, with John
Knowles, July 2007.
The levels
of wealth differ significantly among people who are approaching their
retirement both by current marital status as well as by marital histories. We
develop an equilibrium model of marriage and divorce and household savings, in
which the interplay between endogenous formation and dissolution of families
and savings decisions plays a key role. We show that a calibrated version of
the model can reproduce observed patterns of wealth inequality by marital
status and marital history, and highlight the role of endogenous marriage
formation in wealth accumulation.
An
Economic Analysis of Family Structure: Inheritance Rules and Marriage Systems, manuscript
(first version November 1998). Updated version coming soon.
Traditional societies had norms governing
the choice of mates and rules for determining inheritances. The goal here is to
analyze how different inheritance rules and marriage systems are determined. To
do this, an overlapping generations model of an agrarian economy is
constructed. On the one hand, a young adult’s prospects on the marriage market
depend upon the inheritance he or she will receive from their parents. The size
of the inheritance is a function of who the children marry. On the other hand,
parents depend upon their children to support them in old age. In the analysis,
the size of inheritance and the level of old age support are determined as a
result of a multilateral bargaining process between parents and their children.
Assortative mating, patrilineal
inheritance rules and polygamy emerge naturally out of the model.