Research

Publications

Monetary Policy and Liquidity Constraints: Evidence from the Euro Area (with M. Almgren, J. Gallegos & R. Lima)  

Abstract: We quantify the relationship between the response of output to monetary policy shocks and the share of liquidity constrained households. We do so in the context of the euro area using a Local Projections Instrumental Variables estimation. We construct an instrument for changes in interest rates from changes in overnight indexed swap rates in a narrow time window around ECB announcements. Monetary policy shocks have heterogeneous effects on output across countries. Using micro data, we show that the elasticity of output to monetary policy is larger in countries that have a larger fraction of households that are liquidity constrained.

Working Papers

The Cyclicality of Earnings Growth along the Distribution - Causes and Consequences 

Abstract: Earnings growth is more procyclical at the bottom of the income distribution than at the top. Using high-quality administrative data from Germany, I show that the heterogeneity is chiefly driven by transitions between employment and non-employment, specifically job-finding. I build a heterogeneous agent business cycle model that can rationalize these empirical findings. Agents in the model endogenously choose where to search for work in a labor market that features directed search. The model reproduces the heterogeneous procyclicality of earnings growth, as well as the contribution of job-finding, along the income distribution. I use this model to evaluate two policies aimed at reducing business cycle risk: countercyclical hiring subsidies and universal basic income (UBI). The first policy proposal increases welfare relative to the baseline economy. Implementing UBI decreases the volatility of aggregate consumption but decreases welfare overall. 

The Curious Incidence of Shocks along the Income Distribution (with T. Broer & K. Mitman)

Abstract: We use high-frequency administrative data from Germany to study the effects of monetary policy on income and employment across the earnings distribution. Earnings growth at the bottom of the distribution is substantially more elastic to policy shocks. This unequal incidence is driven by differences in the response of employment risk across the distribution: job loss is more countercyclical for lower-earnings households. Viewed through the lens of a standard incomplete-markets model, the heterogeneous incidence substantially amplifies the equilibrium response of aggregate consumption to shocks.

Abstract: Children have a strong tendency to choose the same occupations as their parents, across all professions, earnings, and skill levels. We study the implications for intergenerational mobility and economic efficiency. Using individual-level data on the skills and personality traits of Swedish men, we estimate a general equilibrium Roy model incorporating unequal access to occupations depending on parental background. In a counterfactual economy with equal access, occupational following drops by half and earnings mobility increases by a third. Sons from low-income families gain the most, highlighting the misallocation of talent. Aggregate earnings gains are small in general equilibrium. Using an identification strategy that exploits long-run employment changes in fathers’ occupations, we estimate that occupational decline reduces sons’ tendency to follow, improves skill-match, and increases earnings, consistent with our structural-model estimates. Our results suggest that creating equal opportunities by removing occupational entry and exit barriers would increase intergenerational mobility without reducing output.