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Author:Mustre-del-Rio, Jose 

Working Paper
Household Financial Distress and the Burden of ‘Aggregate’ Shocks

In this paper we show that household-level financial distress (FD) varies greatly and can increase vulnerability to economic shocks. To do this, we establish three facts: (i) regions in the United States vary significantly in their “FD-intensity,” measured either by how much additional credit households can access or how delinquent they are on debts, (ii) shocks that are typically viewed as “aggregate” in nature hit geographic areas quite differently, and (iii) FD is an economic “pre-existing condition”: the share of an aggregate shock borne by a region is positively correlated ...
Research Working Paper , Paper RWP 20-13

Working Paper
Job duration and the cleansing and sullying effects of recessions

A central question in economics is how business cycles affect the allocation of resources. Focusing on the labor market, an unresolved issue is whether recessions lead to above or below average productive arrangements. Typical models of the labor market imply that recessions cleanse the labor market as low quality employer-employee matches are destroyed and only exceptionally high quality matches are created. These models, however, ignore the potential sullying effect of recessions through on-the-job search, i.e. the process by which workers transit between jobs without an intervening spell ...
Research Working Paper , Paper RWP 12-08

Journal Article
The shadow labor supply and its implications for the unemployment rate

In the wake of the Great Recession there has been a sharp rise in the number of people who indicate they want a job, but are not actively seeking one. This group, on the periphery of the labor market, may be viewed as a "shadow labor supply." Since they are not actively seeking work, they are not counted by the government as unemployed and not considered part of the labor force. But if many start seeking jobs as the economy recovers, the unemployment rate could rise or at least slow its descent. Davig and Mustre-del-Ro analyze possible flow rates from this group and other non-employed ...
Economic Review , Issue Q III , Pages 5-29

Working Paper
The Persistence of Financial Distress

Using recently available proprietary panel data, we show that while many (35%) US consumers experience financial distress at some point in the life cycle, most of the events of financial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble. Roughly 10% of consumers are distressed for more than a quarter of the life cycle, and less than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of ...
Working Papers , Paper 2017-38

Working Paper
Household Financial Distress and the Burden of 'Aggregate' Shocks

The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "pre-existing ...
Working Paper , Paper 20-12

Working Paper
Household Financial Distress and the Burden of “Aggregate” Shocks

The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "preexisting ...
Working Papers , Paper 2019-025

Journal Article
The wage cycle and shadow labor supply

Macro Bulletin

Working Paper
Financial frictions and occupational mobility

An important risk faced by individuals is labor income risk associated with changes in demand for an individual?s selected occupation. This risk reflects uncertainty about future income on the current job. As an example, the declining competitiveness of the U.S. automobile or steel sectors are events that are unanticipated from the perspective of a worker, yet have a strong bearing on future labor income for these workers. One way to limit labor income risk is by switching occupations. This, however, is costly because of retraining costs, forgone earnings, and lost occupational specific ...
Research Working Paper , Paper RWP 12-06

Working Paper
Consumption in the Great Recession: The Financial Distress Channel

During the Great Recession, the collapse of consumption across the U.S. varied greatly but systematically with house-price declines. We find that financial distress among U.S. households amplified the sensitivity of consumption to house-price shocks. We uncover two essential facts: (1) the decline in house prices led to an increase in household financial distress prior to the decline in income during the recession, and (2) at the zip-code level, the prevalence of financial distress prior to the recession was positively correlated with house-price declines at the onset of the recession. Using ...
Research Working Paper , Paper RWP 19-6

Journal Article
Nominal Wage Rigidities and the Future Path of Wage Growth

Wage growth has been modest since the end of the Great Recession, puzzling many market observers and policymakers. Article examines the relationship between wage growth and nominal wage rigidities?the share of workers whose wages have not changed?and find the current pace of wage growth is not historically unusual. The results suggest wage growth may continue on its gradual path as long as the incidence of wage rigidities remains elevated.
Macro Bulletin

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