Working Papers

Consumption and Wealth Distributions in Learning Models with and without Habits

This paper explores the predictions for the wealth distributions derived from different life-cycle models in which agents learn about their income process over the course of their working life. Specifically, we follow the learning specification in Guvenen (2007), and allow for the possibility of a change in the distribution of idiosyncratic income growth rates. We further examine the role of consumption habits, which might prolong the effects of forecast errors about income.

The Competitive Effects of Trade Liberalization in North America
(joint with Ryan Weldzius, UCLA) (Slides)

This paper tests predictions on the behavior of aggregate prices, markups and productivity in response to trade liberalization derived from the Melitz and Ottaviano (2008) model of international trade with heterogeneous firms. Following an approach by Chen, Imbs and Scott (2009), the model's equilibrium conditions for the short- and long-run distribution of the aggregate variables are amended to yield regression equations that identify the effects of tariffs and trade openness on domestic competition in the marketplace. Further to this, model predictions on the effects of third-country openness to trade are tested and information on industry market structure is used to seperately test the model's short- and long run predictions. Our framework is estimated on a dataset covering nine manufacturing industries at the two-digit level in the NAFTA member countries Canada, Mexico and the USA from 1994 to 2006. Consistent with the theoretical predictions, we find that in the short--term there are competitive effects of trade openness on prices, markups, and productivity, whereas in the long--term some of these effects are reversed. Third-country effects, however, run contrary to theoretical predictions and direct tests of short- and long-run industry reactions remain inconclusive.