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Journal Article
Fiscal Federalism and Optimal Income Taxes
This paper studies how local policies?specifically, taxes on income with redistributive goals?affect the migration decisions of individuals and, in turn, how these migration decisions affect local and economy-wide tax and redistribution policies. The author develops a model of optimal taxation for a federal system of governments in the tradition of Mirrlees (1971), where taxes can be fully nonlinear but informational asymmetries prevent the equalization of well being across workers due to informational rents. This article extends the large literature on federalism and tax competition by ...
Journal Article
A Cross-Country Comparison of Labor Force Participation
The labor force participation rates for prime-working-age men have been falling across countries.
Journal Article
Startups Create Many Jobs, but They Often Don't Last
Despite the important role startups play in job growth, the importance of mature firms should not be understated. An important difference between young and old firms is the wage they pay. Older firms pay, on average, a much higher wage than younger firms. This is because a firm?s success is a function of productivity: Output per worker at surviving older firms is higher and, therefore, workers are paid a higher wage. Thus, while startups are very dynamic and have an important role in net job creation, in terms of total employment and earnings they tend to have a modest impact. Only the few ...
Blog
Staff Pick: Declining Labor Share and U.S. Industries
In recent decades, the share of payments to labor have been trending down in several countries. Here are trends among U.S. industries.
Journal Article
Jobs: More Slowly Created, More Slowly Destroyed
Reduced dynamism in the labor market is consistent not only with more stable, longer-lived jobs but also longer joblessness and less job switching.
Working Paper
Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock
We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. ...
Working Paper
Policy Interventions in Sovereign Debt Restructurings
The wave of sovereign defaults in the early 1980s and the string of debt crises in the decades that followed have fostered proposals involving policy interventions in sovereign debt restructurings. A key question about these proposals that has proved hard to handle is how they in influence the behavior of creditors and debtors. We address such challenge by incorporating these policy proposals into a quantitative model in the tradition of Eaton and Gersovitz (1981) that includes renegotiation in sovereign debt restructurings. Critically, the model also endogenizes the choice of debt maturity, ...
Working Paper
News, sovereign debt maturity, and default risk
Leading into a debt crisis, interest rate spreads on sovereign debt rise before the economy experiences a decline in productivity, suggesting that news about future economic developments may play an important role in these episodes. In a VAR estimation, a news shock has a larger contemporaneous impact on sovereign credit spreads than a comparable shock to labor productivity. A quantitative model of news and sovereign debt default with endogenous maturity choice generates impulse responses and a variance decomposition similar to the empirical VAR estimates. The dynamics of the economy after a ...
Blog
Reading the Labor Market in Real Time
A coincident index developed by one of our economists can help gauge the pace of the recovery and obtain real-time information on the state of the labor market.