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. 

 
Publications

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 Richmond RWP 17-14)  submitted.

Using proprietary panel data, we show that while many (35%) US consumers experience financial distress at some point in their lives, most distress events are concentrated in a much smaller proportion of consumers in persistent trouble. Roughly 10% of consumers are distressed for more than a quarter of their lives, and less than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of heterogeneity in time preference but not otherwise. 



(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 wage risk improves welfare by up to 2.5 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 with additional taxes increases mobility away from low-productivity occupations and is welfare improving. In contrast, an equivalent tax increase redistributed in lump-sum fashion decreases mobility and barely changes welfare. 

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

Evidence from the National Longitudinal Survey of Youth (NLSY) suggests the cyclicality of job duration depends on the worker’s prior and future employment status. For example, duration is pro-cyclical for matches where the worker was previously nonemployed and will become nonemployed once the match ends. However, duration is counter- cyclical for matches where the worker was previously nonemployed and transitions to another job following the dissolution of the match. Importantly, these results are not entirely captured by differences in starting wages. 


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

This paper studies the interaction between nominal rigidities, labor market frictions, and consumption risk in a model where firms face sticky prices and post wage contracts to attract risk-averse workers in a frictional labor market. Comparing a calibrated version of the model with two alternative versions—one that separates search and pricing frictions between two types of firms, and one in which a representative household makes consumption and employment decisions at an aggregate level—highlights the importance of integrating labor market and price-setting frictions with individual consumption risk. Separating search and pricing frictions between wholesale and retail sectors increases movements in inflation while muting those in labor markets and other macroeconomic variables. Meanwhile, using a representative household model significantly diminishes the effects of shocks on output and inflation, but increases the effects on vacancies and unemployment.


Works in Progress



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


Super Cool Computational Stuff

Solving the Bewley-Huggett-Aiyagari-Imrohoroglu model with value function iteration on a GPU (slides) (codes)


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.
Subpages (1): GPU stuff