Contact: Moritz Scheidenberger (moritz.scheidenberger@psemail.eu) and Gemma Harris (gemma.harris@psemail.eu)
This internal workshop allows PhD students to present their papers in macroeconomics. Schedule and sessions are sent automatically to PhDs and Professors of the Macro group.
Occasionally, there will also be presentations by visitors or local faculty.
This seminar is co-funded by a French government subsidy managed by the Agence Nationale de la Recherche under the framework of the Investissements d’avenir programme reference ANR-17-EURE-0001.
Multiple event dates
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Effect of Regional Institutions on the Production Network: Evidence from Italy
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I study how income inequality shapes the composition of firms through the composition of aggregate household asset demand. Because higher-income households hold riskier asset portfolios, the degree of income inequality affects the allocation of resources across households with different risk-bearing capacities. Using a quantitative heterogeneous agent model, I show that the sharp rise in income inequality in the United States since the 1980s tilted household portfolios towards riskier assets and shifted the firm distribution towards riskier but more productive firms. This reallocation of capital raised overall productivity and benefitted low-income households through higher wage rates. The model can account for several macro-finance trends, including the secular decrease in the risk-free rate and the stable return to capital. Empirical tests support the model’s predictions, showing that higher income inequality is associated with a larger aggregate share of risky assets and lower risk premia
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Middle-income countries (MICs) are lagging behind in their investment towards a green transition. As some of the largest polluters worldwide, their decision to stay on a carbon-intensive path or not have important consequences for climate change. Opting for a rapid transition carries risks, as it requires significant borrowing with uncertain future benefits. On the other hand, maintaining a “brown” trajectory in a transitioning world could lead to a shift in the composition of their creditors. Bilateral and multilateral investors are withdrawing from “brown” projects, leaving these states exposed to higher financing costs from commercial investors. We build a Small Open Economy model featuring heterogenous investors and collateral constraints to investigate this trade-off over the business cycle.
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Domestic outsourcing has been increasing over the last two decades. Using French matched employer-employee data, I first document that local labor markets differ in terms of exposure to outsourcing, with low-skilled occupations displaying larger shares of outsourced workers. I then find that outsourcing is positively associated with labor market concentration, measured as Herfindahl-Hirschman indices over both new hires and employment. To understand the mechanisms at play, I develop a dynamic search and matching model of a local labor market. I find that in order to have a rise in both outsourcing and labor market concentration, the outsourcing market must display a low degree of competitiveness. This level of competition enables contractors to capture a large share of the labor market. This increase in labor market concentration decreases the outside option of workers, allowing firms and contractors to set lower wages, which I also confirm in the data.
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Many scientists are claiming that the Sixth Mass Extinction of species is underway. On top of the direct negative impacts on human well-being, one reason to worry is that biodiversity provides numerous ecosystem services that are essential to the economy. Therefore, this paper proposes a global macroeco- nomic growth model that takes into account the dynamics of biodiversity and the ecosystem services it provides, focusing on the case of water supply. To do this, I bring together the latest advances in biology on the “Species-Area” and “Biodiversity-Ecosystem Functioning” relationships. I also put forward a new method for estimating sectoral production functions, using input-output tables and their environmental extensions. Importantly, preferences are non- homothetic: there is a minimum subsistence food level. My main results focus on optimal land use on a macroeconomic scale. I show that this value is deter- mined by the trade-off between the total marginal costs and marginal benefits of agricultural production. The costs are broken down into the direct costs of land conversion and the social (productive) costs associated with the loss of ecosystem services. Because of the need for water supply (regulated by biodi- versity) in the industrial sector and the non-homothetic preferences, the optimal land use significantly decreases with the development stage of an economy. Its optimal level is half as high (18% vs. 39%) in a developed country as in a less developed one.
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The Optimal Size of Government: Spending, Taxes, and Debt”, co-authored with Yann Perdereau from the Paris School of Economics
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The paper uses administrative panel data on 10 million French workers to identify heterogeneous earnings risks for workers in private and public sectors, household-level fiscal multipliers, and the distribution of public spending. The results are fed into a HANK model to study the optimal size of the government and the optimal mix between increasing taxes and reducing public spending when reducing public debt. -
Optimal Climate Policy in the Housing Market (with Paloma Péligry)
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We study the efficiency, the distributional and macroeconomic consequences of climate policies in the housing market. We build a heterogeneous agent model featuring two dwelling vintages (low and high energy efficiency), a retrofitting technology and endogenous energy consumption. We highlight the role of equilibrium effects in shaping the impacts of three policies: carbon taxation, subsidies to retrofit and rental market regulation. We ultimately aim at characterizing the optimal policy mix across these alternatives. -
Recessions are conventionally considered as times of cleansing as the least productive firms are driven out of the market. Does the relation between productivity and exit change during the different crises? In this paper, we use a comprehensive administrative dataset of Portuguese firms over 2004-2022 to answer these questions. We find evidence on reverse cleansing effect during each crisis period. This cleansing effect depends on the characteristics of the firms. We show that reverse cleansing is driven by small and young firms.
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Informal Labour and Monopsony Power: Theory and Evidence from India
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We study the implications of labour market dualism on monopsony power in India’s registered manufacturing sector. During the last two decades, there has been a persistent rise in the use of informal labour across the plant size distribution. This has been accompanied with a narrowing wage gap between formal and informal labour in larger plants that are subject to stringent labour market regulations. We study the role of regulations and monopsony power in explaining these trends. Using plant-level panel data from 1998-2019, we explore two empirical strategies. First, we combine a judicial decision that eased hiring and firing of informal labour with exogenous demand shocks to estimate the effect of higher informal usage on wage markdowns and formal-informal wage ratios. Second, we evaluate the implications of outside options on markdowns using the phased introduction of a large rural public works programme which essentially set a rural wage floor. To put structure on our empirical findings, we develop a simple search-and-matching model featuring two labour markets which illustrates how plants might counteract labour market regulations by bargaining down formal wages through frictionless hiring from an informal labour market. -
The impact of uncertainty shocks on the labor market is often portrayed as a story of depreciation rates. As firms delay hiring, firing, and investment decisions in response to uncertainty, the impact on unemployment is driven by the rate at which workers exogenously lose their job. However, this perspective overlooks the substantial level of churn in the labor market driven by quits and their subsequent replacement. Such churn accounts for about 50% of hires and the response of replacement hiring to uncertainty is not trivial. To address this gap, I develop a labor market model to quantify the unemployment impact of unreplaced quits triggered by uncertainty shocks.
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We estimate local government spending multipliers using administrative data on municipalities in Norway. Based on identified plausibly exogenous variation in local spending we estimate the dynamic multiplier to gross product and employment across geographical units and sectors of the economy. The multiplier is driven by non-tradables and the public sector. We find that the multipliers increase with the home bias in consumption, showing that spending multipliers are closely linked to import leakages. The results are robust to various estimation procedures and identifying assumptions, and can also be obtained by using a structural vector autoregressive model (SVAR).
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One of main sources of financing for companies is issuing stocks, but in current macro models there is lack of sufficient focus of those mechanism. When there is entrance of new products (in this case companies) to the market, investors don’t have full information about quality of the product. It may cause overpricing of the company and loose of trading volume during correction. I would like to investigate this mechanism deeper and assess impact of a monetary policy on this matter.
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We assess the macroeconomic and distributional impacts of climate policies in the residential housing market. We build a quantitative heterogeneous agent model featuring high and low energy efficient houses (green and brown). Brown houses are associated with an additional cost of energy and can be renovated to a green house. Two policy experiments are performed: tax on energy and a tax on brown landlords. We find that increasing the price gap between green and brown houses is necessary to enhance renovations and improve the overall housing energy efficiency. However, two distributional issues can emerge. A too high increase of the price of the clean houses reduces the access to (green) homeownership and increases the concentration of energy efficient houses. Whereas a fall of the price of the brown houses leads to a « brown lock-in », where these houses are mostly owned by poor households, who will ultimately be more exposed to future increase in energy price.
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Efficiency and Distributional Costs of Rising Public Debt: the Role of Entrepreneurs
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I show that in an economy with entrepreneurship, a rise in public debt and consequent increase in the interest rate can lead to an increase in productivity and economic activity, with limited increases in inequality. The provision of additional liquidity eases financial constraints on productive entrepreneurs, resulting in a ‘crowding in’ of productive capital. More households choose to start productive firms, which further augments productive capital investment. When the reallocation of capital to productive entrepreneurs is strong enough, economic output increases. Despite higher profits for entrepreneurs in the top percentiles of the income distribution, increased entry into entrepreneurship also allows low- and middle-income households to increase their share of income and mitigates higher concentration at the top. Increases in income inequality are also moderated by the higher progressive income tax used to finance the rise in public debt. -
Fiscal and Monetary Interaction in the Eurozone with Heterogeneous Agents
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This paper studies the extent to which heterogeneous agents may affect the policy-mixes that ensure the existence of a saddle-path in a two-country New-Keynesian model for the Euro- zone (EZ). For that purpose, we use a tractable TANK2 framework. Firstly, when countries are symmetric and thus when open-economy features are turned off, we show that heterogeneous fiscal policies and non-Ricardian fiscal features are powerful tools of stabilization. Secondly, when countries are asymmetric, we shed lights on the stabilizing properties of trade and financial integration and on their reinforcing effects with non-Ricardian fiscal policies. These results support the view that financial integration and heterogeneous fiscal policies are paramount for the stability of the EZ. -
The impact of uncertainty shocks on the labor market is often portrayed as a story of depreciation rates. As firms delay hiring, firing, and investment decisions in response to uncertainty, the impact on unemployment is driven by the rate at which workers exogenously lose their job. However, this perspective overlooks the substantial level of churn in the labor market driven by quits and their subsequent replacement. Such churn accounts for about 50% of hires and the response of replacement hiring to uncertainty is not trivial. To address this gap, I develop a labor market model to quantify the unemployment impact of unreplaced quits triggered by uncertainty shocks.
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Assessing the Impact of Water Restrictions on Production and Financial Stability in France
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Water supply has been identified as a critical Nature-Related Financial Risk for the French financial system, given the strong link between securities held and companies’ reliance on surface water. This study develops scenarios of future water restrictions by analyzing recent hydrological forecasts and historical water use restrictions. Using Input-Output matrices, we quantify the impact and the propagation through supply chains of these water supply shocks. We focus on the output of specific sectors, differentiated by geographic location. Furthermore, we use these impact assessments to calibrate a dynamic spatial model, evaluating companies’ adaptation strategies, including plant relocation and water use reduction.
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In this paper we ask a fundamental yet unexplored question: What is the optimal tax mix among labor income, capital income, and wealth taxes? We begin addressing this question by modifying Guneven et al. (2023) and introducing a key tax avoidance dimension, income shifting. In other words, we consider a framework where the distinction between labor and capital income is fuzzy, and individuals are able to reclassify their labor or capital income for tax avoidance purposes. In this economy, a zero capital income tax, as in Guneven et al. (2023), would lead to behavioral responses by workers reclassifying their labor income as capital income to reduce their effective tax rate (ETR). Finally, we also analyze how different processes of returns heterogeneity affect the optimal tax mix among labor income, capital income, and wealth taxes.
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I build a network model with heterogeneous firms to quantify the spillovers of patenting within the firm’s production network. I validate the model with rich administrative data to identify the frictions to scalability and knowledge diffusion.
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