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Working Paper
Unequal Climate Policy in an Unequal World
We study climate policy in an economy with heterogeneous households, two types of goods (clean and dirty), and a climate externality from the dirty good. Using household expenditure and emissions data, we document that low-income households have higher emissions per dollar spent than high-income households, making a flat carbon tax regressive. We build a model that captures this fact and study climate policies that are neutral with respect to the income distribution. We show that the constrained optimal carbon tax in a heterogeneous economy is heterogeneous: Higher-income households face a ...
Working Paper
The Distributional Effects of COVID-19 and Optimal Mitigation Policies
This paper develops a quantitative heterogeneous agent-life cycle model with a fully integrated epidemiological model in which economic decisions affect the spread of COVID-19 and vice versa. The calibrated model is used to study the distributional consequences and effectiveness of mitigation policies such as a stay-at-home subsidy and a stay-at-home order. First, the stay-at-home subsidy is preferred because it reduces deaths by more and output by less, leading to a larger average welfare gain that benefits all individuals. Second, Pareto-improving mitigation policies can reduce deaths by ...
Report
Firm Entry and Exit and Aggregate Growth
Using data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to firm entry and exit during fast-growth episodes compared to slow-growth episodes. Studies of other countries confirm this empirical relationship. We develop a model of endogenous firm entry and exit based on Hopenhayn (1992). Firms enter with efficiencies drawn from a distribution whose mean grows over time. After entering, a firm?s efficiency grows with age. In the calibrated model, reducing entry costs or barriers to technology adoption generates the pattern we document in the data. ...
Working Paper
The Postpandemic U.S. Immigration Surge: New Facts and Inflationary Implications
The U.S. experienced an extraordinary postpandemic surge in unauthorized immigration. This paper combines administrative data on border encounters and immigration court records with household survey data to document two new facts about these immigrants: They tend to be hand-to-mouth consumers and low-skilled workers that complement the existing workforce. We build these features into a model with capital, household heterogeneity and population growth to study the inflationary effects of this episode. Contrary to the popular view, we find little effect on inflation, as the increase in supply ...
Working Paper
Optimal Bailouts in Banking and Sovereign Crises
We study optimal bailout policies amidst banking and sovereign crises. Our model features sovereign borrowing with limited commitment, where domestic banks hold government debt and extend credit to the private sector. Bank capital shocks can trigger banking crises, prompting the government to consider extending guarantees over bank assets. This poses a trade-off: Larger bailouts relax financial frictions and increase output, but increase fiscal needs and default risk (creating a ‘diabolic loop’). Optimal bailouts exhibit clear properties. The fraction of banking losses the bailouts cover ...
Working Paper
Unequal Climate Policy in an Unequal World
We study climate policy in an economy with heterogeneous households, two types of goods (clean and dirty), and a climate externality from the dirty good. Using household expenditure and emissions data, we document that low-income households have higher emissions per dollar spent than high-income households, making a carbon tax regressive. We build a model that captures this fact and study climate policies that are neutral with respect to the income distribution. A central feature of these policies is that resource transfers across consumers are ruled out. We show that the constrained optimal ...
Working Paper
The Distributional Effects of COVID-19 and Optimal Mitigation Policies
This paper develops a quantitative heterogeneous agent–life cycle model with a fully integrated epidemiological model in which economic decisions affect the spread of COVID-19 and vice versa. The calibrated model is used to study the distributional consequences and effectiveness of mitigation policies such as a stay-at-home subsidy and a stay-at-home order. First, the stay-at-home subsidy is preferred because it reduces deaths by more and output by less, leading to a larger average welfare gain that benefits all individuals. Second, Pareto-improving mitigation policies can reduce deaths by ...
Working Paper
On the Distributional Effects of International Tariffs
We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the US and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor, and capital income, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth households, while only wealthy ...
Surging population growth from immigration may have little effect on inflation
U.S. population growth increased sharply recently following to a wave of immigration. This article examines what this surprise immigration surge could mean for the macroeconomy.
Pandemic Economic Lifeline: Taxes on Consumption, Labor that Fund Stay-at-Home Subsidies
Stay-at-home subsidies funded by taxes on consumption and labor—activities that contribute to viral transmission—can simultaneously reduce deaths and increase output.