Job Market Paper
September 2024.
This paper studies the trade-offs associated with income redistribution in an overlapping generations model in which marginal savings rates increase with permanent income. By transferring permanent income from high savers to low savers, redistribution lowers aggregate savings, and depresses investment in capital. If more capital is welfare improving, the government faces a trade-off between redistribution and investment which depends on the distribution of marginal propensties to save. I estimate this distribution using U.S. household panel data, and use my estimates to calibrate a quantitative overlapping generations model with un-insurable idiosyncratic earnings risk. I study the effects of a simple labor income redistribution policy in this calibrated model and a standard model with homogeneous marginal savings rates. The direct effect of the policy on the permanent income distribution has no effect on capital in a standard model, but a large effect in the calibrated model. This channel accounts for 23% of the drop in aggregate consumption following the policy.
Working Papers
June 2024. Revise and Resubmit at Journal of Political Economy: Macro
Studies the effect of capital-task complementarity on the transmission of monetary policy to consumption. This paper examines how heterogeneity in worker substitutability with capital affects the labor income channel of monetary policy. Empirically, I show that workers performing routine tasks see smaller labor income gains than other workers following a monetary expansion and have higher marginal propensities to consume (MPC). I show that this relationship dampens the role that the labor market plays in monetary policy transmission. I embed capital-task complementarity in a medium-scale HANK model and find that worker heterogeneity reduces the size of the labor income channel by 26 percent.
September 2024.
Derives sufficient conditions for a redistributive role for monetary policy with complete markets We study optimal monetary policy in a dynamic, general equilibrium economy with heterogeneous agents. All heterogeneity is ex-ante: workers differ in type-specific, state- contingent labor productivity, yet markets are complete. The fiscal authority has access to a uniform, state-contingent lump-sum tax (or transfer), but linear taxes are restricted to be non-state contingent. We derive sufficient conditions under which implementing flexible- price allocations is optimal. We show that such allocations are not optimal when the relative labor income distribution varies with the business cycle; in such cases, optimal monetary policy implements a state-contingent mark-up that co-moves positively with a sufficient statistic for labor income inequality.