Jose Mustre-del-Rio's Homepage

I am an economist at the Research Department of the Federal Reserve Bank of Kansas City. My research interests are in macroeconomics and labor economics with a focus on labor supply and wealth. 


Wealth and Labor Supply Heterogeneity (Review of Economic Dynamics, 18, 619-634, 2015.)

This paper examines the importance of ex-ante heterogeneity for understanding the relationship between wealth and labor supply when markets are incomplete. An infinite horizon model is estimated where labor supply is indivisible and households are ex-ante heterogeneous in their labor disutility and market skills. The model replicates key features of the distribution of employment, wages, and wealth observed in the data. Importantly, it reverses the prediction that employment falls with wealth, a pervasive feature of models without ex-ante heterogeneity. A byproduct of the model's empirical performance is that it implies labor supply responses to unanticipated wage changes (e.g. Frisch elasticities) that are a half to two-thirds of those recovered from models with only ex-post heterogeneity.

Working Papers
(Federal Reserve Bank of Kansas City RWP 12-06)  submitted.

We study the effects of market incompleteness on occupational mobility. Under incomplete markets, low-asset workers remain in low-productivity occupations even when the expected value of switching is positive. In a calibrated model, completing markets against earnings risk improves welfare by up to 3.5 percent of lifetime consumption, in part because workers move into better occupations, but also thanks to improved consumption smoothing. We also investigate policies affecting mobility. Subsidizing retraining increases mobility away from low-productivity occupations, but does not improve average welfare. A progressive tax-and-transfer scheme decreases mobility, but improves welfare through redistribution. 

(previously entitled Job Duration, Wages, and the Cleansing and Sullying Effects of Recessions)
(Federal Reserve Bank of Kansas City RWP 12-08) resubmitted.

This paper examines how job quality varies over the cycle. Empirical evidence from the National Longitudinal Survey of Youth (NLSY) suggests match quality is procyclical. This interpretation is corroborated in a calibrated model with on-the-job search. In the model, more high quality matches are observed in expansions because of improved reallocation through on-the-job search. This effect, however, is dominated by lower job destruction in expansions, which preserves matches at the bottom of the quality distribution.

(Federal Reserve Bank of Kansas City RWP 14-17).

We consider the interaction between nominal rigidities and labor market frictions in a framework where Firms jointly make pricing and hiring decisions. In our New Keynesian model, firms are subject to sticky prices and post take-it-or-leave-it contracts to attract workers in a frictional labor market. Relative to the standard model that separates search and pricing frictions between wholesale and retail firms, respectively, our model implies more volatility in hourly wages and less volatility in the vacancy-to-unemployment ratio, even though the take-it-or-leave-it assumption makes workers indifferent between employment and unemployment. Nominal rigidities have a larger impact in our framework than the standard model, since firms face stronger trade-offs in their pricing and employment decisions. 

Works in Progress

Financial Distress: Incidence, Persistence and Policy with Kartik Athreya and Juan Sánchez

Micro-founding Preference Shocks in DSGE Models with  Jonathan L. Willis

Heterogeneity in U.S. Labor Market Flows with Didem Tüzemen and Jonathan L. Willis

The Aggregate Implications of Labor Supply Near Retirement  with William Peterman     

Downward Nominal Rigid Wages, Inflation, and Unemployment with Andrew Foerster

Disclaimer: The views expressed in this website are solely mine and do not represent the views of the Federal Reserve Bank of Kansas City of the Federal Reserve System.
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