Publications

Volatile Hiring: Uncertainty in Search and Matching Models, with W. Den Haan and P. Rendahl
Journal of Monetary Economics, Vol. 123 pp. 1-18 (2021)

Abstract. In search-and-matching models, the nonlinear nature of search frictions increases average unemployment rates during periods with higher volatility. These frictions are not, however, by themselves sufficient to raise unemployment following an increase in perceived uncertainty; though they may do so in conjunction with the common assumption of wages being determined by Nash bargaining. Importantly, option-value considerations play no role in the standard model with free entry. In contrast, when the mass of entrepreneurs is finite and there is heterogeneity in firm-specific productivity, a rise in perceived uncertainty robustlyincreases the option value of waiting and reduces job creation.

Workers, Capitalists, and the Government: Fiscal Policy and Income (Re)Distribution, with C. Cantore
Journal of Monetary Economics, Vol. 119 pp. 58-74 (2021)

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.

Working Papers

Unexpected Effects: Uncertainty, Unemployment, and Inflation, with P. Rendahl (revised version: January 2021)
Submitted

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.

Work in Progress

Teaming Up: Implications of the Knowledge Economy for the Distribution of Productivity and Wages

Discussions

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