Research
Working Papers
Lifetime Hours Inequality and Occupational Choice (Job Market Paper)
Abstract: This paper explores the role of hours worked in contributing to lifetime earnings inequality, a factor often overshadowed by the focus of the literature on wages. The variation in hours worked, particularly early in the life cycle, can significantly contribute to earnings dispersion later in life. I argue that this variation arises from individuals with heterogenous learning ability and leisure preferences selecting into occupations that reward hours worked with future wage growth at different rates. Using empirical evidence, I demonstrate strong correlations between occupational wage growth, cognitive test scores, and hours worked. Informed by this evidence, I develop and calibrate a model of endogenous labor supply and occupational choice to disentangle the role of leisure preferences and learning ability in explaining hours worked and earnings dispersion. I find that cognitive ability accounts for 15% of the variance in log hours at age 23 and 54% of the variance in log earnings at age 55, while leisure preferences explain 85% of the variance in log hours at age 23, and 42% of the variance in earnings at age 55. Finally, I look into the normative implications of these findings, showing that when incorporating learning ability as a driver of hours dispersion, increases in tax progressivity are more effective at reducing inequality and less costly in terms of lifetime welfare.
Publications
The economic effects of international administrations: The cases of Kosovo and East Timor. With Diego Winkelried
Economic Development and Cultural Change, Vol. 69, No. 2, pp. 869-901. 2021
Abstract: Does the involvement of foreign third parties in the management of a country in the wake of a civil war have positive or negative economic effects? The approaches used to address this question in the social and political science literature are mostly qualitative and not sufficiently supported by quantitative evidence. This paper uses a quantitative analysis of the postconflict economic performance of Kosovo and East Timor under international administrations sponsored by the United Nations in the late 1990s. By using the synthetic control impact evaluation technique, we compute suitable counterfactual scenarios for each country to estimate the intervention effects of interest. We find a robust negative effect from the intervention on Kosovo, whereas the effect on East Timor is positive.
Work in Progress
Wealth, Wages and Employment. With Per Krusell, Jinfeng Luo, and Víctor Ríos-Rull
We build a theory for the joint distribution of employment, wages and wealth. We propose a model with risk-averse workers that make consumption and savings decisions while facing competitive search in the labor market. We build this theory sequentially, starting by allowing only unemployed workers to search for jobs in a market of their choice, subject to preference shocks and facing exogenous job separation. Then, we extend the model by allowing for endogenous quitting, on-the-job searching, and labor force exit. Workers face extreme value shocks to their utility of choosing a wage market, and when deciding to search, quit or exit the labor force. Firms chose whether to enter the market, and delegate the choice of a wage market for posting vacancies to a manager, who may make mistakes modelled as extreme value shocks to profits. The entry decision must be such that ex-ante, entrant firms satisfy a zero profit condition. The presence of managers that make mistakes gives full support to wages, even in business cycles. We calibrate this economy so that its steady state aggregates align to those of a modern economy. Additionally, we use state-of-the-art tools to compute the economy's linear response to aggregate productivity shocks. In the future we intend to use the model to analyze the fluctuations of gross employment flows in response to aggregate shocks to infer about wage rigidity.
Informality and Life Cycle Wage Growth in Developing Countries. With Daniel Jaar
Abstract: We explore the role played by informality in curbing life cycle wage growth in developing economies. Using repeated cross-sectional data from the Chilean and Peruvian household surveys we compute life cycle wage growth profiles for formal and informal workers. We find that in both Peru and Chile, there are significant differences in average wage growth by sector, of around 30 percentage points over the life cycle. We found differences to be persistent when looking only at non-college workers, and manufacturing industry. The goal is to build a theory that can explain why workers in the informal sector accumulate less human capital than their formal counterparts, accounting for differences in productivity of firms in both sectors.
Pre-Phd Research
The Peruvian Land Reform: Synthetic control estimation. With Diego Winkelried
Presented at the 2016 Congress of the Peruvian Economics Association (Slides)
Abstract: It is well documented in the literature that an adequate distribution of land can have positive effect on agricultural production. However, there is still an open debate on whether land reform have been successful in Latin America. Some studies(see, for example Saleth (1991)) report a positive effect of the Peruvian Land Reform (1969-1978), but do so by comparing Peru with an inadequate counter-factual. In order to estimate an unbiased intervention effect, we will construct an adequate counter-factual, using the synthetic controls method proposed by Abadie & Gardeazabal (2003). In this preliminary version, we find that the land reform had a negative effect in agricultural and livestock production per capita, and agricultural yield. Results are robust to changes in the control group and in the predictors selected for the model. Future versions of this research will include more outcome variables and additional robustness tests.