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Working Paper
The Postpandemic U.S. Immigration Surge: New Facts and Inflationary Implications
Cheremukhin, Anton A.; Hur, Sewon; Mau, Ron; Mertens, Karel; Richter, Alexander W.; Zhou, Xiaoqing (2024-10-01)
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 Papers , Paper 2407

Working Paper
Endogenous Borrowing Constraints and Stagnation in Latin America
Restrepo-Echavarria, Paulina (2013-02-15)
The Latin American debt crisis of the 1980's had a major and long lasting effect on per-capita consumption: its level in 2005 was not that different from that in 1980. This paper studies the long stagnation in per-capita consumption that followed the crisis, and its relationship with recessions and sovereign risk, using a small open economy real business cycle model with complete markets, endogenous borrowing limits (limited commitment), endogenous capital accumulation, and domestic productivity and international interest rate shocks. I find that the model does an excellent job at explaining ...
Working Papers , Paper 2014-37

Working Paper
Family Job Search and Wealth: The Added Worker Effect Revisited
Garcia-Perez, J. Ignacio; Rendon, Sílvio (2020-04-30)
We propose and estimate a model of family job search and wealth accumulation with data from the Survey of Income and Program Participation (SIPP). This dataset reveals a very asymmetric labor market for household members who share that their job finding is stimulated by their partners' job separation. We uncover a job search-theoretic basis for this added worker effect, which occurs mainly during economic downturns, but also by increased non-employment transfers. Thus, our analysis shows that the policy goal of in-creasing non-employment transfers to support a worker's job search is partially ...
Working Papers , Paper 20-17

Working Paper
Earnings Misperceptions and Household Distress
Sanchez, Juan M.; Song, Stefan (2025-11-03)
Households learn whether income changes are temporary or persistent from their own paychecks. This paper develops a quantitative model of financial distress that incorporates this inference and estimates the extent to which households overweight recent outcomes—diagnostic expectations—using survey data on income beliefs. The model explains distress without assuming extreme impatience and aligns with the observed relationship between income and interest rates. Learning and diagnostic expectations account for about half of delinquencies and one-third of bankruptcies. Diagnostic expectations ...
Working Papers , Paper 2025-030

Working Paper
Optimal Age-Based Vaccination and Economic Mitigation Policies for the Second Phase of the COVID-19 Pandemic
Heathcote, Jonathan; Krueger, Dirk; Rios-Rull, Jose-Victor; Glover, Andrew (2021-12-17)
In this paper we ask how to best allocate a given time-varying supply of vaccines during the second phase of the Covid-19 pandemic across individuals of different ages. Building on the heterogeneous household model of optimal economic mitigation and redistribution developed by Glover et al. (2021), we contrast the actual vaccine deployment path that prioritized older individuals with one that first vaccinates younger workers. Vaccinating older adults first saves more lives but slows the economic recovery relative to inoculating younger adults first. Vaccines carry large welfare benefits in ...
Research Working Paper , Paper RWP 21-15

Working Paper
Optimal Social Insurance and Rising Labor Market Risk
Scheffel, Martin; Krebs, Tom (2019-02-01)
This paper analyzes the optimal response of the social insurance system to a rise in labor market risk. To this end, we develop a tractable macroeconomic model with risk-free physical capital, risky human capital (labor market risk) and unobservable effort choice affecting the distribution of human capital shocks (moral hazard). We show that constrained optimal allocations are simple in the sense that they can be found by solving a static social planner problem. We further show that constrained optimal allocations are the equilibrium allocations of a market economy in which the government ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 18

Working Paper
Consumer Bankruptcy, Mortgage Default and Labor Supply
Li, Wenli; Meghir, Costas; Oswald, Florian (2022-08-30)
We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic consumption events, while bankruptcy is governed by the basic institutional framework in the U.S. as implied by Chapter 7 and Chapter 13. The model is estimated using micro data on credit reports and mortgages combined with data from the American Community Survey. We use the model to understand the ...
Working Papers , Paper 22-26

Working Paper
The Effects of Collecting Income Taxes on Social Security Benefits
Jones, John Bailey; Li, Yue (2017-01-12)
Since 1983, Social Security benefits have been subject to income taxation, a provision that can significantly increase the marginal income tax rate for older individuals. To assess the impact of this tax, we construct and calibrate a detailed life-cycle model of labor supply, saving, and Social Security claiming. We find that in a long-run stationary environment, replacing the taxation of Social Security benefits with a revenue-equivalent increase in the payroll tax would significantly increase labor supply, consumption and welfare. From an ex-ante perspective an even more desirable reform ...
Working Paper , Paper 17-2

Working Paper
Lending Standards and Borrowing Premia in Unsecured Credit Markets
Dempsey, Kyle; Ionescu, Felicia (2021-06-24)
Using administrative data from Y-14M and Equifax, we find evidence for large spreads in excess of those implied by default risk in the U.S. unsecured credit market. These borrowing premia vary widely by borrower risk and imply a nearly flat relationship between loan prices and repayment probabilities, at odds with existing theories. To close this gap, we incorporate supply frictions – a tractably specified form of lending standards – into a model of unsecured credit with aggregate shocks. Our model matches the empirical incidence of both risk and borrowing premia. Both the level and ...
Finance and Economics Discussion Series , Paper 2021-039

Working Paper
The Nonlinear Effects of Fiscal Policy
Brinca, Pedro; Holter, Hans; Faria-e-Castro, Miguel; Ferreira, Miguel H. (2021-01-15)
We argue that the fiscal multiplier of government purchases is nonlinear in the spending shock, in contrast to what is assumed in most of the literature. In particular, the multiplier of a fiscal consolidation is decreasing in the size of the consolidation. We empirically document this fact using aggregate fiscal consolidation data across 15 OECD countries. We show that a neoclassical life-cycle, incomplete markets model calibrated to match key features of the U.S. economy can explain this empirical finding. The mechanism hinges on the relationship between fiscal shocks, their form of ...
Working Papers , Paper 2019-015

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