Working Papers
Fiscal Consolidation: Balancing Growth, Debt and Inequality (with François Langot, Selma Malmberg, Fabien Tripier and Jean-Olivier Hairault)
This paper evaluates different fiscal consolidation policies using a Heterogeneous-Agent New-Keynesian (HANK) model. Three key results emerge. First, the effectiveness of fiscal consol-idation improves markedly when implemented through a fiscal rule rather than resulting from a series of discretionary decisions: for the same level of expenditure cuts, the reduction in the debt-to-GDP ratio is larger, and the uncertainty surrounding debt forecasts is lower. Second, it is more efficient to use household transfers as an instrument than public consumption. Third, asignificant reduction in the debt-to-GDP ratio can be achieved without penalizing GDP growthor exacerbating inequalities if the government drastically reduces social insurance-based trans-fers while increasing social assistance transfers. These results are based on an original stochastic debt-sustainability analysis using a HANK model, which provides: (i) the projected path of thefuture debt-to-GDP ratio for a given policy, conditional on a particular business cycle episode, and (ii) the full distribution of future debt-to-GDP ratios, thereby highlighting the policy’s benefits in reducing the risk of a public debt increase under adverse economic conditions. Eval-uations are based on the French economy, which has committed to lowering it in order to comply with the European Treaty.
Automation, Offshoring and Employment Distribution in Western Europe , GATE WP 2021-08
This paper investigates the effects of automation and offshoring on the dynamics of the occupational distribution of employment with a focus on Western Europe between 2000 and 2016. I use a general equilibrium model with three regions, three types of workers, ICT capital, trade in final goods and endogenous offshoring. Fed with exogenous measures of ICT-capital prices and trade costs, the model replicates key features of the data. It matches the observed dynamics of offshoring to Eastern Europe and Asian countries. It also reproduces accurately the observed polarization of the labor market: abstract and manual labor increase while routine labor falls. A counterfactual experiment reveals that automation is the main driver of the polarization. Since it is also the only factor that drives individuals to become abstract (high-skill) workers, it is welfare enhancing. The effects of falling trade costs on labor polarization are smaller, but imply welfare gains.
Publication
Heterogeneity, Rigidity and Convergence of Labor Markets in the Euro Area, Annals of Economics and Statistics, No.140, pp127-167, 2020.
This paper investigates the welfare consequences of labor-market convergence reforms for a large range of calibrations in a two-country monetary-union DSGE model with search and matching frictions. The model features trade in consumption and investment goods, price stickiness, firing costs and is calibrated to reflect the structural asymmetries of flexible and rigid countries of the Euro Area in terms of size and labor-market variables. Across steady states, convergence brings welfare gains for the rigid country and welfare losses for the flexible country in most situations studied. The higher the flexibility induced by the convergence, the higher the welfare gains. Taking into account the transition path does not strongly modify the insights of the steady-state analysis. However, the number of situations in which both countries experience long-term welfare gains is higher than in the steady-state analysis. In the short run, the rigid country experiences welfare gains and the flexible country welfare losses whatever the situation. As such, I conclude that a convergence of the labor markets can lead to substantial welfare gains in a monetary union, especially if the implementation is carefully designed.
Work in Progress
Robots, Optimal Taxation and Welfare
Optimal Unemployment Insurance and Heterogeneity (with Julien Albertini and Stéphane Moyen)
Strategic Investment and Cournot Competition (with Rodolphe Dos Santos Ferreira, Teresa Lloyd-Braga and Leonor Modesto)