The Effects of Labor Market Conditions on Working Time: the US-EU Experience

We consider a labor market search model where, by working longer hours, individuals acquire greater skills and thereby obtain better jobs. We show that job inequality, which leads to within-skill wage differences, gives incentives to work longer hours. By contrast, a higher probability of losing jobs, a longer duration of unemployment, and in general a less tight labor market discourage working time. We show that the different evolution of labor market conditions in the US and in Continental Europe over the last three decades can quantitatively explain the diverging evolution of the number of hours worked per employee across the two sides of the Atlantic. It can also explain why the fraction of prime age male workers working very long hours has increased substantially in the US, after reverting a trend of secular decline.working hours, wage inequality, unemployment, search, human capital filtering

Habit formation: implications for the wealth distribution

In this paper we study the role of habit formation in shaping the wealth distribution in an otherwise standard heterogeneous agents model economy with idiosyncratic uncertainty. We compare the inplications for precautionary savings and for wealth concentration between economies that only differ in the role played by habit formation. Once preferences are properly adjusted so that the Intertemporal Elasticity of Substituion is the same in all model economies studied, we find that habit formation brings a hefty increase in precautionary savings and very mild reductions in the coefficient of variation and in the Gini index of wealth. We also find that the reductions in these measures of inequality also hold when we adjust our economy so that aggregate savings are the same as in the economy without habit formation. These findings hold for both persistent and non persistent habits although for the former the quantitative size of the effects is much larger. We conclude that habit formation, while being a mechanism that increases the amount of precautionary savings generated in a model, does not change the implications for wealth inequality that arise from standard models

Health and Heterogeneity

Heterogeneity, Health Status, Health Related Behavior, Human Capital

HABIT FORMATION: INPLICATIONS FOR THE WEALTH DISTRIBUTION

In this paper we study the role of habit formation in shaping the wealth distribution in an otherwise standard heterogeneous agents model economy with idiosyncratic uncertainty. We compare the inplications for precautionary savings and for wealth concentration between economies that only differ in the role played by habit formation. Once preferences are properly adjusted so that the Intertemporal Elasticity of Substituion is the same in all model economies studied, we find that habit formation brings a hefty increase in precautionary savings and very mild reductions in the coefficient of variation and in the Gini index of wealth. We also find that the reductions in these measures of inequality also hold when we adjust our economy so that aggregate savings are the same as in the economy without habit formation. These findings hold for both persistent and non persistent habits although for the former the quantitative size of the effects is much larger. We conclude that habit formation, while being a mechanism that increases the amount of precautionary savings generated in a model, does not change the implications for wealth inequality that arise from standard models.

Investment expensing and progressivity in flat-tax reforms

In this article we quantify the aggregate, distributional and welfare consequences of investment expensing and progressivity in Hall and Rabushka type of flat-tax reforms of the US economy. To do so we use a heterogeneous households model featuring both life cycle and dynastic elements as well as nonlinear wage dynamics. Our findings suggest that moving toward a progressive consumption-based flat-tax scheme could achieve the goals of raising government income, stimulating the economy, and providing a safety net for the households that have been hit the hardest by the recession. In particular, we find that investment expensing brings about sizeable output gains and a nontrivial increase in after-tax income inequality. However, it results in aggregate welfare gains in steady state because the large deduction in the labor income tax acts as a boon for the income poor, because the larger capital stock implies that workers earn higher wages, and because investment expensing allows households to abandon poverty faster. We also find that the progressivity of the reforms matters for welfare: economies with more progressive flat-tax schemes are better for the very poor and are ultimately preferred by a Benthamite social planner as they allow households to achieve better consumption smoothing and a better allocation of their work effort across time and states

Precautionary Savings and Wealth Distribution under Habit Formation Preferences

We study the role of habit formation in shaping the amount of precautionary savings and the wealth distribution in heterogeneous agents model economies with idiosyncratic uncertainty. We adjust preferences to equate the Intertemporal Elasticity of Substitution in all model economies. We find that habit formation brings a hefty increase in precautionary savings and very mild reductions in the coefficient of variation and in the Gini index of wealth. These findings hold for both persistent and non-persistent habits, with the effects of the former being much larger.Publicad

Dual labor markets in Spain: a firm-side perspective

Usando microdatos contables, en este trabajo documentamos el uso de los contratos temporales e indefinidos por las empresas españolas entre 2004 y 2019. Mostramos que el uso de contratos temporales es muy heterogéneo entre distintas empresas y que la distribución de la tasa de temporalidad está muy sesgada hacia la derecha: la ratio de temporalidad mediana es de tan solo el 3 %, mientras que la tasa media es del 18 %. Parte de esta variación está asociada con el sector y la región en los que opera la empresa, así como con el ciclo macroeconómico. Sin embargo, aproximadamente el 80 % de la variación viene explicada por diferencias entre empresas pertenecientes al mismo sector, la misma región y el mismo punto del ciclo. Individualmente, incluso tras controlar por el sector y la región, observamos que las empresas más grandes y las más jóvenes son las que hacen un mayor uso de los contratos temporales.Using comprehensive balance-sheet data for Spain, we document the use of fixed-term and open-ended contracts by firms over the period 2004-2019. We show that the use of temporary contracts is very heterogeneous across firms, with the distribution of the temporary share being severely right-skewed: the median share of temporary employment is only 3%, while the average is 18%. Part of this variation is related to the sector and region where firms operate as well as to the macroeconomic cycle. However, around 80% of the variation reflects differences across firms operating in the same industry, in the same location and at the same point of the business cycle. At the individual level, even after controlling for sector and region, we observe that larger and younger firms make more extensive use of temporary contracts

Government procurement and access to credit: firm dynamics and aggregate implications

Este trabajo analiza cómo los diferentes sistemas de asignación de licitaciones públicas entre empresas afectan a la dinámica empresarial y al crecimiento económico a largo plazo. Por un lado, construimos una base de datos administrativos que combina información sobre las características de las empresas, el acceso al crédito bancario y la participación en licitaciones públicas. La evidencia empírica sugiere que las licitaciones públicas (ventas al sector público) proporcionan a las empresas un valor como colateral que facilita su acceso a la financiación bancaria en mayor medida que las ventas al sector privado. Por otro lado, construimos un modelo de dinámica empresarial con restricciones financieras —basadas tanto en activos físicos como en flujos de caja— y con la presencia de un sector público que compra bienes y servicios a las empresas del sector privado. A continuación, calibramos los parámetros del modelo con la evidencia empírica disponible a nivel micro, y se utiliza para cuantificar las consecuencias macroeconómicas a largo plazo de diferentes sistemas de asignación de licitaciones públicas entre empresas. En concreto, encontramos que los sistemas que promueven la participación de pequeñas empresas tienen efectos macroeconómicos significativos, y su impacto neto sobre el crecimiento económico a largo plazo es ambiguo. Estas políticas ayudan a las pequeñas empresas a crecer, al relajar sus restricciones financieras, lo que aumenta la producción y el crecimiento a largo plazo. Sin embargo, estas políticas también reducen los incentivos de ahorro para las grandes empresas, lo que implica un efecto negativo sobre la acumulación de capital y el crecimiento económico. El impacto neto de ambas fuerzas depende del tipo de restricciones financieras que afrontan las empresas y de la forma específica en que se implementa la política.We provide a framework to study how different public procurement allocation systems affect firm dynamics and long-run macroeconomic outcomes. We build a new panel dataset of administrative data for Spain that merges credit-register loan data, quasi-census firm-level data and public procurement project data. We find evidence consistent with the hypothesis that procurement contracts provide valuable collateral for firms, and that they do so to a greater extent than private-sector contracts. We then build a model of firm dynamics with both asset-based and earnings-based borrowing constraints and a government that buys goods and services from private-sector firms, and use it to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that policies that promote the participation of small firms have sizeable macroeconomic effects, but their net impact on aggregate output is ambiguous. These policies help small firms grow and overcome financial constraints, which increases output in the long run. However, they also reduce saving incentives for large firms, decreasing output. The relative strength of these two forces and hence which of them dominates crucially depends on the type of financial frictions firms face and the specific way the policy is implemented

The role of habit formation in general equilibrium macroeconomics

Available from British Library Document Supply Centre- DSC:DXN061682 / BLDSC - British Library Document Supply CentreSIGLEGBUnited Kingdo