Distortions, Endogenous Managerial Skills and Productivity
Differences,
with Dhritiman Bhattacharya and Gustavo Ventura, August
2011.
We develop a span-of-control model where managerial skills are endogenous and
the outcome of investments over the life cycle of managers. We calibrate this
model to U.S plant-size data to quantify the effects of distortions that are
correlated with the size of production units. These distortions lead to sharp
reductions in plant productivity and the fraction of employment in large
plants, with a quantitatively important role for managerial investments. We
find that the model can account quite well for properties of Japanese
size-distribution data, with a model-implied TFP of about 83% of the U.S.
Distortions are critical in accounting for the differences in size distribution
between the U.S. and Japan.
Taxing Women: A Macroeconomic Analysis, with Remzi Kaygusuz and Gustavo Ventura, August 2011.
Based on well-known evidence on labor supply elasticities, several authors
have concluded that women should be taxed at lower rates than men. We evaluate
the quantitative implications of taxing women at a lower rate than men.
Relative to the current system of taxation, setting a proportional tax rate on
married females equal to 4% (8%) increases output and married female labor
force participation by about 3.9% (3.4%) and 6.9% (4.0%), respectively.
Gender-based taxes improve welfare and are preferred by a majority of
households. Nevertheless, welfare gains are higher when the U.S. tax system is
replaced by a proportional, gender-neutral income tax.
Taxation and Household
Labor Supply, with Remzi Kaygusuz and Gustavo Ventura, July 2011.
We evaluate reforms to the U.S. tax system in a
life-cycle setup with heterogeneous married and single households, and with an
operative extensive margin in labor supply. We restrict our model with
observations on gender and skill premia, labor force participation of married
females across skill groups, children, and the structure of marital sorting. We
concentrate on two revenue-neutral tax reforms: a proportional income tax and a
reform in which married individuals .le taxes separately (separate .ling). Our
.ndings indicate that tax reforms are accompanied by large increases in labor
supply that differ across demographic groups, with the bulk of the increase
coming from married females. Under a proportional income tax reform, married
females account for more than 50% of the changes in hours across steady states,
while under separate.filing reform, married females account for all the change
in hours.
Technology and
the Changing Family, Jeremy
Greenwood, Georgi Kocharkov and Cezar Santos, June 2011.
Marriage has
declined since 1960. The drop is bigger for non-college educated individuals
versus college educated ones. Divorce has increased. More so for the
non-college educated vis a vis the college educated. Additionally, assortative
mating has risen. People are more likely to marry someone of the same education
level today than in the past. A model of marriage and divorce is
calibrated/estimated to Öt the postwar U.S. data. The contribution of di§erent
factors, such as skilled-biased technological progress in the market,
labor-saving technological progress in the home, and the narrowing of the
gender gap, to explaining these facts is gauged.
Income Taxation of U.S. Households: Basic Facts, with Remzi Kaygusuz and Gustavo
Ventura, May 2011.
We use micro data from the U.S. Internal Revenue Service to document how
households' tax liabilities vary with income, marital status and the number of
dependents. We report facts on the distributions of average and marginal taxes,
properties of the joint distributions of taxes paid and income, and discuss how
taxes are affected by marital status and the number of children. The data
reveals a large dispersion in tax rates and taxes paid. Ranking households
according to the average tax rates they face, those at top 1% face taxes in
excess of 27.5%, while the median tax rate is about 8%. About 14.5% of married
and 31.8% of unmarried households do not pay any taxes. Given the progressivity
in the system, tax liabilities are more unequally distributed than income. The
top 5% (1%) of households account for 54% (34.8%) of total tax liabilities,
while top 5% (1%) of households have 34.8% (20.3%) of total income. We also
provide parametric estimates of tax functions for use in applied work in
macroeconomics and public finance.
Firm Dynamics, Job Turnover, and Wage Distributions in an
Open Economy, with Kerem Cosar and James Tybout, May 2011.
This
paper explores the effects of tariffs, trade costs, and firing costs on firm
dynamics and labor markets outcomes. The analysis is based on a general
equilibrium model with labor market search frictions, wage bargaining, firing
costs, firm-specific productivity shocks, and endogenous entry/exit decisions.
Firing costs reduce firms’ profits and discourage them from quickly
adjusting their employment levels in response to idiosyncratic shocks. Tariffs
and other trade costs reduce rents for efficient firms and increase rents for
inefficient firms, as in Melitz (2003). These well-known effects interact with
idiosyncratic productivity shocks and with scale economies in hiring costs to
determine the equilibrium size distribution of firms, entry/exit rates, job
turnover rates, rate of informality, and cross-firm wage distributions.
The
Farm, the City and the Emergence of Social Security, with Elizabeth Caucutt and Thomas F. Cooley,
September 2010, NEW version.
In this paper we
study the social, demographic and economic origins of social security. The data
for the U.S.
and for a cross section of countries make it clear that urbanization and
industrialization are strongly associated with the rise of social insurance. We
describe a model economy in which demographics, technology, and social security
are linked together. We study an economy with two locations (sectors), the farm
(agricultural) and the city (industrial). The decision to migrate from rural to
urban locations is endogenous and linked to productivity differences between
the two locations and survival probabilities. In our framework, steep
age-earning profiles for middle-aged farmers yield little support for social
security when everyone lives on the farm. As people migrate to the city, support
for social security emerges. We assume the level of social security is
determined by majority voting. We show that a calibrated version of this
economy is consistent with the historical transformation in the United States.
In the model, social security emerges as a political and economic equilibrium.
Modeling the political economy of social security within a model of structural
change leads to a rich economic environment in which the median voter is
identified by both age and location.
From Shame to Game in One Hundred
Years: An Economic Model of the Rise in Premarital Sex and its
De-Stigmatization, with Jesús Fernández-Villaverde and Jeremy Greenwood, NBER Working Paper, no. 15677,
January 2010
Societies
socialize children about many things, including sex. Socialization is costly.
It uses scarce resources, such as time and effort. Parents weigh the marginal
gains from socialization against its costs. Those at the lower end of the
socioeconomic scale indoctrinate their daughters less than others about the
perils of premarital sex, because the latter will lose less from an
out-of-wedlock birth. Modern contraceptives have profoundly affected the
calculus for instilling sexual mores, leading to a de-stigmatization of sex. As
contraception has become more effective there is less need for parents,
churches and states to inculcate sexual mores. Technology affects culture.
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Marital Instability and the
Distribution of Wealth, with John Knowles, manuscript, 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.