June 2023
I am excited to post a new working paper with Georgios Nikolakoudis and Gianluca Violante called Price Level and Inflation Dynamics in Heterogeneous Agent Economies. The paper explores the role of precautionary savings, MPC heterogeneity and redistribution in driving inflation by extending the Fiscal Theory of the Price Level to a Bewley economy. One advantage of the heterogeneous agent setting over the representative agent setting is that the economy admits a steady-state in which government run persistent deficits. We quantify the maximum sustainable deficit for the United States and show that it depends on the progressivity of the tax and transfer system.
June 22
Finally, a completely revised version of Markups, Labor Market Inequality and the Nature of Work with Piotr Zoch.
Finally, a completely revised version of Markups, Labor Market Inequality and the Nature of Work with Piotr Zoch.
March 2022
Gianluca Violante and I finally have a draft of our paper with with on The Marginal Propensity to Consume in Heterogeneous Agent Models. This paper is forthcoming in Annual Reviews of Economics. We conduct a systematic investigation of models with different preferences, dimensions of ex-ante heterogeneity, income processes and asset structure, and show that the most important factor determining the average MPC is the share and type of hand-to-mouth households.
Gianluca Violante and I finally have a draft of our paper with with on The Marginal Propensity to Consume in Heterogeneous Agent Models. This paper is forthcoming in Annual Reviews of Economics. We conduct a systematic investigation of models with different preferences, dimensions of ex-ante heterogeneity, income processes and asset structure, and show that the most important factor determining the average MPC is the share and type of hand-to-mouth households.
September 2020
I recently recorded a podcast for the Global Perspectives Policy Podcast at The University of Sydney. In it we discuss my journey from growing up in Sydney to becoming an Economics Professor in Chicago, the history of heterogeneous agent macroeconomics and my recent work applying the heterogeneous agent framework to study the distributional consequences of the COVID-19 pandemic and associated lockdown policies. You can find the full podcast here.
I recently recorded a podcast for the Global Perspectives Policy Podcast at The University of Sydney. In it we discuss my journey from growing up in Sydney to becoming an Economics Professor in Chicago, the history of heterogeneous agent macroeconomics and my recent work applying the heterogeneous agent framework to study the distributional consequences of the COVID-19 pandemic and associated lockdown policies. You can find the full podcast here.
September 2020
My work with Ben Moll and Gianluca Violante on the distributional consequences of alternative policy responses to the COVID-19 pandemic “The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.” is now available as a BFI working paper here. We have also produced a non-technical summary of the paper, and summaries of corollary output on exposure and vulnerability to the pandemic by occupation, the economic welfare effects of the CARES Act, and taxation-based alternatives to lockdowns.
My work with Ben Moll and Gianluca Violante on the distributional consequences of alternative policy responses to the COVID-19 pandemic “The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.” is now available as a BFI working paper here. We have also produced a non-technical summary of the paper, and summaries of corollary output on exposure and vulnerability to the pandemic by occupation, the economic welfare effects of the CARES Act, and taxation-based alternatives to lockdowns.
August 2020
A number of updates:
A draft of my recent work with Ben Moll and Gianluca Violante on the distributional consequences of alternative policy responses to the COVID-19 pandemic is finally available: “The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.” . In order to avoid taking a stand on the economic value of a life, we advocate the use of distributional Pandemic Possibility Frontier (PPF) for evaluating the trade-offs between lives and livelihoods associated with different policies. The non-linearity of the PPF can help reconcile different views in the current debate over the existence of a trade-off when considering lockdowns of different lengths. Under all policies that we consider, the economic costs are large and heterogeneous. This heterogeneity arises from the fact that households whose earnings are most exposed to the pandemic (those in social occupations with low capacity to work from home) are also the most financially fragile. Targeted policies such as Pigouvian taxes on on-site work and socially intensive consumption, with appropriately designed rebates can greatly flatten the PPF and deliver lower economic costs for the same loss in lives.
My paper with Andreas Fuster and Basit Zafar “What Would You Do With $500? Evidence from Gains, Loss, News and Loans” is now forthcoming in Review of Economic Studies.
My paper with Felipe Alves, Ben Moll and Gianluca Violante “A Further Look at the Propagation of Monetary Policy Shocks in HANK” is now forthcoming in Journal of Money, Credit and Banking (25th anniversary issue).
A number of updates:
A draft of my recent work with Ben Moll and Gianluca Violante on the distributional consequences of alternative policy responses to the COVID-19 pandemic is finally available: “The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.” . In order to avoid taking a stand on the economic value of a life, we advocate the use of distributional Pandemic Possibility Frontier (PPF) for evaluating the trade-offs between lives and livelihoods associated with different policies. The non-linearity of the PPF can help reconcile different views in the current debate over the existence of a trade-off when considering lockdowns of different lengths. Under all policies that we consider, the economic costs are large and heterogeneous. This heterogeneity arises from the fact that households whose earnings are most exposed to the pandemic (those in social occupations with low capacity to work from home) are also the most financially fragile. Targeted policies such as Pigouvian taxes on on-site work and socially intensive consumption, with appropriately designed rebates can greatly flatten the PPF and deliver lower economic costs for the same loss in lives.
My paper with Andreas Fuster and Basit Zafar “What Would You Do With $500? Evidence from Gains, Loss, News and Loans” is now forthcoming in Review of Economic Studies.
My paper with Felipe Alves, Ben Moll and Gianluca Violante “A Further Look at the Propagation of Monetary Policy Shocks in HANK” is now forthcoming in Journal of Money, Credit and Banking (25th anniversary issue).
April 2020
I have a new paper with Steve Bond, Arshia Hashemi and Piotr Zoch called Some Unpleasant Markup Arithmetic: Production Function Elasticities and their Estimation from Production Data. We highlight some commonly overlooked issues about the identification and estimation of markups using the ratio estimator - the ratio of the output elasticity of a variable input to that input’s cost share in revenue. This is the estimator that has underpinned a recent literature that seeks to estimate heterogeneity and trends in markups. Most importantly, we show that it is essential that one uses an output elasticity, as opposed to a revenue elasticity, in the numerator of the ratio estimator. When the revenue elasticity is used, then the ratio estimator contains no information about markups at all. We then show that without data on output quantities (as opposed to sales or revenue) it is not possible to obtain consistent estimates of the output elasticity, and hence markups, using any current methods, when firms have market power and there is heterogeneity in markups
I have a new paper with Steve Bond, Arshia Hashemi and Piotr Zoch called Some Unpleasant Markup Arithmetic: Production Function Elasticities and their Estimation from Production Data. We highlight some commonly overlooked issues about the identification and estimation of markups using the ratio estimator - the ratio of the output elasticity of a variable input to that input’s cost share in revenue. This is the estimator that has underpinned a recent literature that seeks to estimate heterogeneity and trends in markups. Most importantly, we show that it is essential that one uses an output elasticity, as opposed to a revenue elasticity, in the numerator of the ratio estimator. When the revenue elasticity is used, then the ratio estimator contains no information about markups at all. We then show that without data on output quantities (as opposed to sales or revenue) it is not possible to obtain consistent estimates of the output elasticity, and hence markups, using any current methods, when firms have market power and there is heterogeneity in markups
February 2020
Here is a new working paper with Piotr Zoch titled Markups, Labor Market Inequality and the Nature of Work. We develop framework for thinking about how changes in markups affect the labor income distribution. Our approach hinges on a distinction between two uses of labor in modern economies: the traditional use of labor for production, versus alternative uses of labor for overhead, marketing and other expansionary activities. We use our framework to assess the impact of changes in markups on the overall labor share and on labor income inequality across occupations. We identify the production and expansionary content of different occupations from the co-movement of occupational income shares with markup-induced changes in the labor share. We find that around one-fifth of US labor income compensates expansionary activities, and that occupations with larger expansionary content have experienced the fastest wage and employment growth since 1980. Our framework can rationalize a counter-cyclical labor share in the presence of sticky prices and can be used to study the distributional effects of demand shocks, monetary policy and secular changes in competition. You can find the working paper here, and a non-technical summary here.
October 2019
In our paper, The Housing Boom and Bust, we put forward the view that the boom and bust in aggregate house prices in the USA during the 2000s was due to shifts in beliefs about future house price growth, rather than shifts in credit conditions. Some economists have found this view hard to swallow, given existing research on the topic. In order to explain what our paper says, what it doesn’t say and why, we have produced this non-technical FAQ.
October 2019
The Housing Boom and Bust is now forthcoming in the Journal of Political of Economy. We started working on this paper in 2012 when one co-author, who now has tenure, was still in graduate school. The paper was solicited by the journal before I had any association with the University of Chicago. Turnaround times at the journal were fast; the long time lag is due to the length of time it took us to complete the first draft and subsequent revisions.
April 2019
My paper with Sam Schulhofer-Wohl on The Changing (Dis-)Utility of Work was awarded the IPUMS Time Use Research Award ! Thanks to IPUMS for their amazing work in making data easily accessible and for recognizing our work.
March 2019
I recorded a podcast with Central Banking about HANK models, wealthy hand-to-mouth households and the intersection between monetary policy and inequality. You can listen to it here.
February 2019
Ben Moll and I are co-teaching a four-day master-class on Moneteary and Fiscal Policy with Heterogeneity, targeted towards central bankers with an interest in learning about Heterogeneous Agent New Keynesian (HANK) Models. The class will be held in Chicago from August 4-8, 2019. Details and application instructions can be found here.
Februrary 2019
Submissions are now open for the NBER Summer Institute group on “Micro Data and Macro Models” that I co-organize with Erik Hurst and Gianluca Violante. This year the group will meet from July 15-18, 2019. Papers can be submitted here.
January 2019
Revised version of The Housing Boom and Bust: Model Meets Evidence available online (joint with Kurt Mitman and Gianluca Violante). This version has been resubmitted to Journal of Political Economy. It now contains a detailed explanation of the role of rental markets in our main finding that changes in credit conditions alone have a minimal effect on house prices.
June 2018
Revised version of The Changing (Dis-)Utility of Work available online (joint with Sam Schulhofer-Wohl). This paper is forthcoming in the Journal of Economic Perspectives.
June 2018
Revised version of Microeconomic Heterogeneity and Macroeconomic Shocks available online (joint with Gianluca Vionante). A less technical version of this paper is forthcoming in the Journal of Economic Perspectives.
February 2018
First draft of What Would You do with $500? Evidence from Gains, Losses, News and Loans available online (joint with Andreas Fuster and Basit Zafar).
January 2018
Replication materials and description of computational algorithm for Monetary Policy According to HANK available online.