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Working Paper
Heterogeneity in labor supply elasticity and optimal taxation
Standard public finance principles imply that workers with more elastic labor supply should face smaller tax distortions. This paper quantitatively tests the potential of such an idea within a life-cycle model with heterogeneous two-member households. I find that younger and older-wealthier households have a larger labor supply elasticity than middle-aged households. The same is true for household members who are not the sole financial provider in the unit relative to primary breadwinners. To decrease inefficient distortions I study a tax system that uses information on the age, assets, and ...
Briefing
How Much Do Labor Costs Affect Prices in Recessions and in Expansions?
Inflation had been quite low in the decade following the Great Recession but surged following the COVID-19 recession. Can labor costs explain this change in the dynamics of inflation? According to recent research, the relatively stable inflation in the last decade indicates a weaker pass-through of labor costs to wages, especially in the goods sector of the economy. The current inflationary episode, however, suggests that the wage-price pass-through may have regained its strength.
Journal Article
What Can We Learn from Online Wage Postings? Evidence from Glassdoor
We use millions of user-entry salaries from Glassdoor to evaluate how well data from online wage postings compare with more traditional, aggregated data, such as the Quarterly Census for Employment and Wages (QCEW) or household-level data such as the Panel Study of Income Dynamics (PSID). We perform our analysis across industries as well as geographical areas. We find that industry employment shares differ substantially between Glassdoor and QCEW. However, the correlation between industry- and region-specific average salaries in Glassdoor and the QCEW is fairly high. Similarly, the ...
Journal Article
A Business Cycle Analysis of Debt and Equity Financing
This article provides an introductory, yet comprehensive, business cycle analysis of firm financing. Using data from Compustat, we find that debt issuance is procyclical while the net sale of stock is countercyclical. However, an equity financing measure that includes stock compensation and especially mergers turns out to be weakly procyclical. Nevertheless, there is widespread heterogeneity in firm financing. Compared to large firms, the equity issuance of small firms tends to be more procyclical while debt issuance tends to be less procyclical. We then examine how well a quantitative model ...
Working Paper
Misallocation and Credit Market Constraints: the Role of Long-Term Financing
We measure aggregate productivity loss due to credit market constraints in a model with endogenous borrowing constraints, long-duration bonds, and costly equity payouts. Due to long-duration bonds, the model generates a realistic distribution of credit spreads. We structurally estimate our model using firm-level data on credit spreads from Thomson Reuters Bond Security Data and balance sheet data from Compustat. Credit market constraints increase aggregate productivity by 0.4% through their effect on the credit spread distribution. However, credit market constraints also interact with costly ...
Working Paper
Regional Consumption Responses and the Aggregate Fiscal Multiplier
We use regional variation in the American Recovery and Reinvestment Act (2009-2012) to analyze the effect of government spending on consumer spending. Our consumption data come from household-level retail purchases in Nielsen and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases consumer spending by $0.29. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, New Keynesian model with heterogeneous agents and incomplete markets. Our model successfully generates the ...
Briefing
Estimating Aggregate Fiscal Multipliers from Local Data
Variations among regions in their responses to economic policies can be used to estimate the effects of those policies at the national level while minimizing or eliminating issues of reverse causation. Recent research has employed county-level data to look at the effects of federal government spending ? in particular, the 2009?12 stimulus ? on aggregate consumption.
Working Paper
Labor-Market Wedge under Engel Curve Utility: Cyclical Substitution between Necessities and Luxuries
In booms, households substitute luxuries for necessities, e.g., food away from home for food at home. Ignoring this cyclical pattern of composition changes in the consumption basket makes the labor-market wedge -- a measure of inefficiency that reflects the gap between the marginal rate of substitution and the real wage -- appear to be more volatile than it actually is. Based on the household expenditure pattern across 10 consumption categories in the Consumer Expenditure Survey, we show that taking into account these composition changes can explain 6-15% of the cyclicality in the measured ...
Working Paper
Regional Consumption Responses and the Aggregate Fiscal Multiplier
We use regional variation in the American Recovery and Reinvestment Act (2009-2012) to analyze the effect of government spending on consumer spending. Our consumption data come from household-level retail purchases in the Nielsen scanner data and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases local non-durable consumer spending by $0.29 and local auto spending by $0.09. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, New Keynesian model with heterogeneous ...
Journal Article
A Life-Cycle Model with Individual Volatility Dynamics
This article solves a heterogeneous-agents, life-cycle model with idiosyncratic, time-varying volatility. Volatility is modeled based on an ARCH specification. I compare the life-cycle behavior of savings and consumption in a model with idiosyncratic volatility versus typical models with constant income risk. Idiosyncratic volatility generates a larger incentive to save precautionarily and, as a result, a lower consumption inequality.