Sergio Ocampo Díaz

I am an Assistant Professor of Economics at Western University in London, Ontario.

I hold a Ph.D. in economics from the University of Minnesota.

My research interests are macroeconomic theory and heterogeneous agent macroeconomics.

On the teaching tab you will find the syllabi of the courses I have taught, as well as additional materials for the math camp and stochastic calculus courses.

Link to my CV

Contact: socampod (at)

Twitter: @socampdi

My Western University page:

My Ideas page:

Recent Research Papers

Time series data for robust inflation measures, such as median and trimmed mean inflation, only start in 1977. We extend these series back to 1960 for Personal Consumption Expenditure (PCE) inflation, providing additional episodes of high and rising inflation. We evaluate the robustness of the series along multiple dimensions: First, we find that robust inflation measures tend to diverge in periods of low inflation, but agree when headline inflation is high. The range between the robust measures averages 0.76 percentage points. Second, using yearly instead of monthly inflation when trimming or computing median inflation produces markedly different time series. Third, by contrast, variation in the number of PCE categories used in calculation and trim points for trimmed means do not have significant effects. Finally, we compare the performance of 61 robust inflation measures in predicting (current and future) trend inflation. Trimmed mean measures that trim based on yearly inflation perform best overall, while core inflation performs well when inflation is low, and median inflation consistently underperforms.

When is a wealth tax preferable to a capital income tax? We study this question theoretically in an infinite-horizon model with entrepreneurs and workers, in which entrepreneurial firms are subject to idiosyncratic productivity shocks and collateral constraints. There are two types of steady-state equilibria. The first one—which emerges under a wide set of plausible parameter values—is inefficient and exhibits capital misallocation and heterogeneous returns. The second one is efficient and exhibits homogeneous returns, but requires implausibly lax borrowing limits. In the heterogeneous returns equilibrium, replacing a capital income tax with a wealth tax increases steady-state aggregate productivity and output if (and only if) entrepreneurial productivity is positively auto-correlated. The gains result from the “use-it-or-lose-it” effect, which causes a reallocation of capital from entrepreneurs with low productivity to those with high productivity. We provide necessary and sufficient conditions for a switch to wealth taxes to imply higher average welfare, which amount to a lower bound on the capital-elasticity of output, α—around 1/3 for most parameter combinations. We then study the optimal mix when both tax instruments can be used jointly to maximize welfare. Optimal policy depends on two thresholds. When α is sufficiently high, optimal policy involves a positive wealth tax and a negative capital income tax (a subsidy); the sign flips when α is sufficiently low, and both taxes are positive between these two thresholds. Finally, we consider extensions that introduce a corporate sector, rent-seeking behavior, and endogenous entrepreneurial effort.

Use it or lose it: Efficiency gains from wealth taxation [Under Revision for the Quarterly Journal of Economics]

with Fatih Guvenen, Gueorgui Kambourov, Burhan Kuruscu and Daphne Chen (NBER working paper version)

This paper studies the quantitative implications of wealth taxation (tax on the stock of wealth) as opposed to capital income taxation (tax on the income flow from capital) in an overlapping-generations incomplete-markets model with rate of return heterogeneity across individuals. With such heterogeneity, capital income and wealth taxes have opposite implications for efficiency and some key distributional outcomes. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, on the other hand, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the base and shifts the tax burden toward unproductive entrepreneurs. This reallocation increases aggregate productivity and output. In the simulated model calibrated to the U.S. data, a revenue-neutral tax reform that replaces capital income tax with a wealth tax raises welfare by about 8% in consumption-equivalent terms. Moving on to optimal taxation, the optimal wealth tax is positive, yields even larger welfare gains than the tax reform, and is preferable to optimal capital income taxes. Interestingly, optimal wealth taxes result in more even consumption and leisure distributions (despite the wealth distribution becoming more dispersed), which is the opposite of what optimal capital income taxes imply. Consequently, wealth taxes can yield both efficiency and distributional gains.

Coverage: Financial Times (Free Lunch, Article), The Economist (Article), Bloomberg (Noah Smith: 2016, 2019), St. Louis Fed (interview with Fatih Guvenen), Observatorio Fiscal (Online OpEd, in Spanish)

I develop an assignment model of occupations with multidimensional heterogeneity in production tasks and worker skills. Tasks are distributed continuously in the skill space, whereas workers have a discrete distribution with a finite number of types. Occupations arise endogenously as bundles of tasks optimally assigned to a type of worker. The model allows us to study how occupations respond to changes in the economic environment, making it useful for analyzing the implications of automation, skill-biased technical change, offshoring, and worker training. Using the model, I characterize how wages, the marginal product of workers, the substitutability between worker types, and the labor share depend on the assignment of tasks to workers. I introduce automation as the choice of the optimal size and location of a mass of identical robots in the task space. Automation displaces workers by replacing them in the performance of tasks, generating a cascading effect on other workers as the boundaries of occupations are redrawn.

Increases in national concentration have been a salient feature of industry dynamics in the U.S. and have contributed to concerns about increasing market power. Yet, local trends may be more informative about market power, particularly in the retail sector where consumers have traditionally shopped at nearby stores. We find that local concentration has increased almost in parallel with national concentration using novel Census data on product-level revenue for all U.S. retail stores. The increases in concentration are broad based, affecting most markets, products, and retail industries. We implement a new decomposition of the national Herfindahl-Hirschman Index and show that despite similar trends, national and local concentration reflect different changes in the retail sector. The increase in national concentration comes from consumers in different markets increasingly buying from the same firms and does not reflect changes in local market power. We estimate a model of retail competition which links local concentration to markups. The model implies that the increase in local concentration explains one-third of the observed increase in markups.

Key Equation: National HHI = 0.02xLocal HHI + 0.98xCross-Market HHI

      • National concentration measures do not respond to local changes.

      • Instead, national HHI depends on cross-market HHI (people in different markets shopping at the same firms)

We evaluate the aggregate effects of expansions of credit supply in environments where subsistence self-employment is prevalent. We extend a standard macro development model to include unemployment risk, which becomes a key driver of selection into self-employment. The model is consistent with the joint distribution of earnings and occupations, the reaction of wages to labor demand shocks, and the small effects of expansions in the supply of microloans on the earnings of the self-employed. We find that the elasticity of aggregate output to expansions in credit supply is proportional to the elasticity of individual earnings. This is because of the muted effects of wages in general equilibrium in the presence of subsistence self-employment. We also consider variations on the implementation of the credit expansion and the introduction of targeted transfers. The effects on total factor productivity (TFP) are ambiguous and depend on the targeting and generosity of the policies, with those that encourage self-employment lowering TFP.

Extra: Previous version with additional productivity shifters (Draft, 2019)

[New Draft, June 2022] Robust Contracts in Common Agency [Under Revision for The RAND Journal of Economics]

with Keler Marku and Jean Baptiste Tondji

Business activities often involve a common agent managing a variety of projects on behalf of investors with potentially conflicting interests. The extent of the agent’s actions is also often unknown to investors, who have to design contracts that provide incentives to the manager despite this lack of crucial knowledge. We consider a game between several principals and a common agent, where principals know only a subset of the actions available to the agent. Principals demand robustness and evaluate contracts on a worst-case basis. This robust approach allows for a crisp characterization of the equilibrium contracts and payoffs and provides a novel proof of equilibrium existence in common agency by constructing a pseudo-potential for the game. Robust contracts make explicit how the efficiency of the equilibrium outcome relative to collusion among principals depends on the principals’ ability to extract payments from the agent.