Primary fields: macroeconomics, labor economics

Areas of interest: uncertainty, productivity, inequality, computational methods

Working Papers

Abstract. We propose a novel two-agent New Keynesian model to study the interaction of fiscal policy and household heterogeneity in a tractable environment. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model is consistent with micro data on empirical intertemporal marginal propensities to consume, and it avoids implausible profit income effects on labor supply. Relative to the traditional two-agent model, these features imply, respectively, a lower sensitivity of consumption to the composition of public financing; and smaller fiscal multipliers alongside pronounced redistributive effects.
Abstract. This paper studies the role of uncertainty in a search-and-matching framework with risk-averse households. Heightened uncertainty about future productivity reduces current economic activity even in the absence of nominal rigidities, although the effect is reinforced by the latter. The reason is that a more uncertain future increases households’ precautionary behavior, causing demand to contract. At the same time, future asset prices become more volatile and covary positively with aggregate consumption, which increases the risk premium, puts negative pressure on asset values, and contracts supply. Compared to negative demand shocks, uncertainty shocks are less deflationary and render a flatter Phillips curve.
Abstract. This paper analyzes in detail the role of uncertainty shocks in search and matching models of the labor market, both when uncertainty actually increases and when it is only expected to do so. The non-linear nature of search frictions increases average unemployment rates during periods with higher volatility. However, they are by themselves not sufficient to raise the unemployment rate in response to an increase in perceived uncertainty. We show that key to understanding the result of Leduc and Liu (2016) that perceived uncertainty does affect the unemployment rate is the particular form of wage bargaining chosen, Nash bargaining; option value considerations play no role.

Work in Progress

Job Market Paper

  • ...should hopefully appear here sometime in 2022 ;)


"Household Portfolio Choices and Nonlinear Income Risk," by J. Galvez

Done & Dusted

Working for Workers? The Effect of Government Spending Shocks on the Labour Share of Income