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Working Paper
Why is Trade Not Free? A Revealed Preference Approach
A prominent explanation for why trade is not free is politicians’ desire to protect some of their constituents at the expense of others. In this paper we develop a methodology that can be used to reveal the welfare weights that a nation’s import tariffs implicitly place on different groups of society. Applied in the context of the United States in 2017, this method implies that redistributive trade protection accounts for a significant fraction of US tariff variation and causes large monetary transfers between US individuals, mostly driven by differences in welfare weights across sectors ...
Working Paper
Variety, globalization, and social efficiency
This paper puts recent work on the benefits of variety into the context of a more complete quantitative analysis of the Dixit-Stiglitz-Krugman model of monopolistic competition. We show how the gains from globalization are reflected in the increase in variety and the exploitation of economies of scale, and that the social efficiency question is quantitatively insignificant. These results follow from examining a Bertrand-Nash equilibrium that allows for a finite number of varieties to affect the elasticity of demand facing each firm. We develop a precise expression for per capita real income ...
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 Paper
Inferring Inequality with Home Production
We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and a home production technology. Accounting for home production amplifies welfare-based differences across households meaning that inequality is larger than we thought. Using the optimality condition that households allocate more consumption to their more productive sector, we infer that the dispersion in home productivity across households is roughly three times as large as the dispersion in their wages. ...
Working Paper
The system of national accounts and alternative economic perspectives
Brent Moulton and Nicole Mayerhauser (2015) point out that, for more than 50 years, economists have featured the concept of human capital in their models of labor, growth, productivity, and distribution of income. The authors recommend the addition to the System of National Accounts (SNA) of supplemental person-level accounts: i.e., a System of Person Accounts (SPA). They see this as the best way of recognizing the processes of human capital creation as well as related issues of how income is distributed among individuals and families. The authors argue that this change would support three ...
Working Paper
Welfare Evaluation in a Heterogeneous Agent Model: How Representative is the CES Representative Consumer?
The present paper investigates the impact of asymmetric price changes on welfare in a model with heterogeneous consumers. I consider consumer heterogeneity a la Anderson et al. (1992). The standard welfare equivalence between the CES representative consumer and the discrete choice model breaks down in presence of asymmetric price changes. In fact, asymmetric variation in prices produce differential gains among heterogeneous consumers. I show that there exists no feasible Kaldor-Hicks income transfer such that the gains are equally redistributed. Intuitively, in presence of decreasing marginal ...
Working Paper
The Persistence of Financial Distress.
Using recently available proprietary panel data, we show that while many (35%) US consumers experience fi nancial distress at some point in the life cycle, most of the events of nancial 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 Paper
Toward a Framework for Time Use, Welfare, and Household Centric Economic Measurement
What is meant by economic progress, and how should it be measured? The conventional answer is growth in real GDP over time or compared across countries, a monetary measure adjusted for the general rate of increase in prices. However, there is increasing interest in developing an alternative understanding of economic progress, particularly in the context of digitalization of the economy and the consequent significant changes Internet use is bringing about in production and household activity. This paper discusses one alternative approach, combining an extended utility framework considering ...
Working Paper
Larceny in the Product Market: A Hidden Tax?
This paper compares the distortionary impact of larceny theft across different product markets, characterizing such crime as a “hidden tax” on producers or consumers. We estimate the size of this tax and how it is affected by exogenous changes in larceny rates driven by the enactment of higher felony larceny thresholds. Pre-enactment hidden tax rates are small, ranging from 0.1 percent to 0.4 percent. These tax rates rise or fall with enactment, varying by product market. Such exogenous changes in the hidden tax induce state-level annual welfare changes that are minimal, ranging from ...
Working Paper
Should I Stay or Should I Go? Inter-state Mobility and Earnings Gains of Young College Graduates
In the late 1990s, nearly 7 percent of young college graduates moved across state lines every year. These workers enjoyed 30 percent higher earnings three years after moving relative to similar stayers, but their gains were not immediate, amounting to only 7 percent in the first year post-move. By the mid-2010s, mobility fell by more than half, and average earnings gains among movers fell and became more front-loaded. At the same time, debt increased among all young college graduates. We propose a model of geographic mobility with incomplete markets, where moving to a new state can deliver ...