PSE Assistant Professor and Executive director of the Macroeconomic Risk Chair
Macroeconomics
Seminar
Location 48 Boulevard Jourdan, 75014 Paris, France
Location R2-21
Presence On site
This seminar is organised by Paris School of Economics with the support of Banque de France, Cepremap and Université Paris 1 Panthéon-Sorbonne.
Organiser
Operational contact: Laurence Vincent (laurence.vincent@ens.psl.eu)
This seminar is supported by the Agence Nationale de la Recherche as part of the Investissement d’avenir programme under the reference ANR-17-EURE-0001.
Multiple event dates
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Firms and workers predominately match via job postings, networks of personal contacts or the public employment agency, all of which help to ameliorate labor market frictions. We investigate how firms’ differential use of these search channels impacts workers’ turnover, wage inequality and labor market sorting. Using novel linked survey-administrative data we document each channel’s separate role for matching high-wage firms and high-wage workers and for job mobility. To evaluate the relevance of these search channels for employment, wages and sorting, we structurally estimate an equilibrium job ladder model featuring two-sided heterogeneity and endogenous recruitment effort in multiple search technologies. The estimation reveals that job postings are the most instrumental channel for positive worker-firm sorting. Although the public employment agency provides lower hiring rates for firms, its removal has sizeable consequences, with aggregate employment declining by 1.4 percent and rising bottom wage inequality, but little effect on sorting.
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Brothers in Arms: Near Equivalence of Monetary and Fiscal Rules
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Co-author: Morten Ravn We consider monetary-fiscal interaction in a New Keynesian model with finite planning horizons. We argue that the introduction of finite planning horizons has fundamental implications for the impact of monetary and fiscal policy rules and for the impact of aggregate shocks. We emphasise that, relative to the complete markets benchmark, the equilibrium becomes less sensitive to the parameters of the policy rules, and more sensitive to timing and anticipation of shocks. -
Co-authors: Timo Boppart and Per Krusell A production efficiency perspective naturally leads to the prescription that more productive individuals should work more than less productive individuals. Yet, systematic differences in actual hours worked across high- and low-wage individuals are barely noticeable. We highlight that the insurance available to households is an important determinant behind this fact. Using a dynamic heterogeneous-agent model with insurance frictions, income effects calibrated to match aggregate hours across time and space, and financial frictions that deliver realistic wealth dispersion, we report stark effects of insurance: perfect insurance would raise aggregate labor productivity by 9.6 percent and decrease hours worked by 7.7 percent.
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Co-authors: Jonathan Payne and Adam Rebei. We develop a new method to globally solve and calibrate search and matching models with aggregate shocks and heterogeneous agents. We characterize general equilibrium as a high dimensional partial differential equation with the distribution as a state variable. We then use deep learning to solve and calibrate the model using the simulated method of moments. This allows us to study search markets that are not “block recursive” and compute variables (e.g. wages and prices) that were previously unattainable. In applications to labor search models, we show that distribution feedback plays a more important role when aggregate shocks have an asymmetric impact across agents. Positive assortative matching weakens more in prolonged expansions, disproportionately benefiting low-wage workers. In applications to over-the-counter markets, we show how financial crises impact bond yields across different maturities.
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How do noncompete agreements between workers and firms affect wages and em-ployment in equilibrium? We build a tractable framework of wage posting with on-the-jobsearch and large employers that provides a natural laboratory to assess anti-competitivepractices in the labor market. We characterize the impact of market structure and showthat noncompetes can sharply suppress wages. We validate the quantitative model withempirical evidence on the impact of mergers and noncompetes on employment and wages.Banning noncompetes in the US would raise wages by 4%. Wage gains are large when de-mand is inelastic, training costs are high, and when noncompetes are widespread.
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This paper employs a general equilibrium framework to analyze how temperature affects firm-level demand, productivity, and input allocative efficiency, informing aggregate productivity damages due to climate change. Using data from Italian firms and detailed climate data, it uncovers a sizeable negative effect of extreme temperature on firm-level productivity and revenue-based marginal product of capital. Based on these estimates, the model generates aggregate productivity losses higher than previously thought, ranging from 0.60 to 6.82 percent depending on the scenario and the extent of adaptation. Additionally, climate change exacerbates Italian regional disparities.
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Co-authors: Sigurd Galaasen, Refet Gürkaynak, Mathis Mahlum and Krisktina Molnar. HANK Sufficient Statistics Out of Norway (HANKSSON) answers a core question of the heterogeneity in macroeconomics literature theoretically and empirically: does heterogeneity amplify the aggregate effects of demand shocks and policies. We provide two sufficient statistics (SS) and test these using individual-level matched data for personal characteristics, income, wealth and consumption for the Norwegian population. The first SS ascertains whether heterogeneity drives a wedge between the (representative-agent) average MPC and a model-consistent (heterogeneous-agent) aggregate MPC. The second SS elicits whether the consumption of constrained, “hand-to-mouth” agents is more exposed to aggregate fluctuations. Our robust key finding is that to analyze aggregate behavior, one does not need to keep track of heterogeneity: the average and the aggregate are about the same. Along the way we show that the amplification result that is currently prevalent in the literature is due to using labor earnings and is overturned when using model-consistent disposable income. This is due to the strong insurance effect of taxes and transfers; even the much less progressive US tax and transfer system produces no amplification due to heterogeneity. The same “close to irrelevance” conclusion arises based on the second statistic using consumption data directly. Not even during the Great Recession do we see heterogeneity contribute meaningfully to demand shock amplification.
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Household support during inflationary episodes: a macroeconomic analysis
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Co-authors: Alan Olivi and Dajana Xhani. We investigate the impact of government interventions designed to support households during inflationary periods. Using a multi-sector heterogeneous-agents model with non-homothetic preferences, we derive a social welfare function that accounts for macroeconomic channels, sectoral dynamics, and distributional concerns. We then assess the welfare effects of fiscal support payments—potentially targeted at specific household groups—compared to price controls. Our results indicate that price controls can generate significant welfare gains by preventing aggressive monetary tightening, which could otherwise lead to substantial welfare losses due to the distributional effects of interest rate changes. -
Temporary Layoffs, Loss-of-Recall, andCyclical Unemployment Dynamics
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Co-authors: Mark Gertler and Christopher Huckfeldt. We revisit the role of temporary layoffs in the business cycle. While somehave emphasized a stabilizing effect due to recall hiring, we quantify from thedata an important countercyclical destabilizing effect due to “loss-of-recall”,whereby workers in temporary-layoff unemployment lose their job permanently.We develop a quantitative model allowing for endogenous flows of workers acrossemployment and both temporary-layoff and jobless unemployment. The modelcaptures both pre- and post-pandemic unemployment dynamics, including therecessionary role of loss-of-recall. We use our structural model to show that thePaycheck Protection program generated sizable employment gains, in part bysignificantly reducing loss-of-recall. -
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We assess the business cycle properties and how to reconcile micro and macro elasticities for a large set of models with uninsurable risk, against their representative or two-agent counterparts, and against the data for three large areas. The contribution of uninsurable risk to business cycle fluctuations is negligible. Borrowing constraints induce high MPC, but tend to heighten the response of aggregate consumption to monetary shocks, even when including deviations from rational expectations. In the baseline model with homogenous labour hours MPNs are higher than in the data. A combination of wage rigidity, heterogenous labour hours or occupational mobility improves the data matching. At last, we examine those models’ performance in assessing distributive policies effects, focusing on progressive taxation. The degree of tax progressivity, or the peak of the Laffer curve, is higher under heterogenous labour hours as the lower MPNs reduce the costs of loss in employment, indicating the importance of empirically grounded model specification.
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Co-authors: Pete Klenow, Reiko Laski, and Huiyu Li. Which firms drive aggregate productivity growth? Price-earnings ratios differ markedly and persistently across publicly-listed firms. Large differences remain after netting out proxies for firm-specific discount factors. The implication is that listed firms deviate from Gibrat’s Law, under which expected growth rates are the same across firms. We find further that high P/E firms tend to see increases in their earnings relative to sales, which we interpret as rents from ideas. We construct an endogenous growth model with persistent shocks to firm innovation step-sizes and calibrate it to match patterns in the data. The model can be used to infer expected growth contributions of individual firms (such as members of the Magnificent Seven) and sectors (such as AI firms). We find that the share of growth coming from the smallest listed firms exceeds their 10% sales share, whereas the largest listed firms account contribute notably less than their 10% sales share.
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Paris School of Economics
Paris School of Economics
Address: 48 boulevard jourdan 75014 Paris