April 13 | 3:30 pm  | Monroe 120

Thomas Winberry (Wharton): “The Distributional Impact of the Minimum Wage”, joint with Erik Hurst, Patrick Kehoe, and Elena Pastorino

Abstract: "We develop a general equilibrium framework with worker heterogeneity, monopsony power, and putty-clay frictions in order to study the distributional impact of large changes in the minimum wage. In the long run, we find that a high minimum wage has perverse distributional impacts in that it reduces the employment, income, and welfare of precisely the low-income workers it was meant to help. However, these long-run consequences take twenty years to fully materialize because firms slowly adjust the labor intensity of their capital stock. We also study the long-run impacts of alternative transfer programs, such as the earned-income tax credit, and find they are much more effective at improving outcomes for workers at the bottom of the wage distribution. In this context, a modest increase in the minimum wage is beneficial because it prevents firms from lowering the pre-transfer wages they pay to workers."

April 6 | 3:30 pm  | Monroe 120

David Lagakos (Boston U): “Technology and Local State Capacity: Evidence from Ghana”, joint with James Dzansi, Anders Jensen, and Henry Telli

Abstract: "This paper studies the role of technology in local-government tax collection capacity in the developing world. We first conduct a new census of all local governments in Ghana to document a strong association between technology use and property tax billing, collection and enforcement. We then randomize the use of a new revenue collection technology within one large municipal government. Revenue collectors using the new technology delivered 27 percent more bills and collected 103 percent more tax revenues than control collectors. Collectors using the new technology learned faster about which households in their assigned areas were willing and able to make payments. We reconcile these experimental findings in a simple Beckerian time-use model in which technology allows revenue collectors to better allocate their time towards households that are the most likely to comply with taxpaying duties. The model’s predictions are consistent with experimental evidence showing that treatment collectors are more likely to target households with greater liquidity, income, awareness of taxpaying duties, and satisfaction with local public goods provision."

March 18 | 11 am  | Virtual

Markus Brunnermeier (Princeton): “A Fiscal Theory of the Price Level with a Bubble” and “Debt as Safe Asset”, both joint with Sebastian Merkel and Yuliy Sannikov

Abstract 1: "This paper incorporates a bubble term in the standard FTPL equation to explain why countries with persistently negative primary surpluses can have a positively valued currency and low inflation. It also provides two illustrative models with closed-form solutions in which the return on government bonds is below the economy’s growth rate. The government can “mine” the bubble by perpetually rolling over its debt. The welfaremaximizing bubble mining rate is independent of government spending, and additional spending needs should be financed exclusively through taxes. Despite the bubble, the price level remains determined provided government policy credibly promises primary surpluses off-equilibrium."

Abstract 2:  "The price of a safe asset reflects not only the expected discounted future cash flows but also future service flows, since retrading allows partial insurance of idiosyncratic risk in an incomplete markets setting. This lowers the issuers’ interest burden. As idiosyncratic risk rises during recessions, so does the  value of the service flows bestowing the safe asset with a negative b. This resolves government debt valuation puzzles and allows the government to run a permanent (primary) deficit without ever paying back its debt. Nevertheless, the government faces a “Debt Laffer Curve”. The paper also has important implications for fiscal debt sustainability."

Feburuary 23 | 3:30 pm  | Monroe 120

Minsu Chang (Georgetown University): “Heterogeneity and Aggregate Fluctuations”, joint work with Xiahong Chen and Frank Schorfheide

Abstract: "We develop a state-space model with a state-transition equation that takes the form of a functional vector autoregression and stacks macroeconomic aggregates and a cross-sectional density. The measurement equation captures the error in estimating log densities from repeated cross-sectional samples. The log densities and the transition kernels in the law of motion of the states are approximated by sieves, which leads to a finite-dimensional representation in terms of macroeconomic aggregates and sieve coefficients. We use this model to study the joint dynamics of technology shocks, per capita GDP, employment rates, and the earnings distribution. We find that the estimated spillovers between aggregate and distributional dynamics are generally small, a positive technology shock tends to decrease inequality, and a shock that raises the inequality of earnings leads to a small but not significant increase in GDP."