This paper develops a political economy model to evaluate how inequality affects policies via the political process. The model is an extension of Krusell and Rios-Rull (1999) to incorporate uninsured idiosyncratic risk to income. Using this framework, we evaluate the response of social insurance...

This paper uses a dynamic political economy model to evaluate whether the observed rise in wage inequality and decrease in median to mean wages can explain some portion of the relative increase in transfers to low earnings quintiles and relative increase in effective tax rates for high earnings...

In this paper, we construct a parsimonious overlapping-generations model of human capital accumulation and study its quantitative implications for the evolution of the U.S. wage distribution from 1970 to 2000. A key feature of the model is that individuals differ in their ability to accumulate...

Wage inequality has been significantly higher in the U.S. than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the U.S. has experienced a large increase in wage inequality, whereas the CEU has seen only modest...

Based on our estimates (in progress), we plan to analyze how and why the following have changed over time and across cohorts: (i) overall and within-group wage inequality, (ii) lifecycle wage growth, (iii) job promotion rates, (iv) implied on-the-job investment. We are particularly interested in...

The model described here provides a central role for policies and institutions that compress the wage structure. For example, unions and progressive income taxes reduce (after-tax) wages at the higher end of the wage distribution while artificially boosting them at the lower end. As a result,...

We study how individuals match their skills with an occupation's demands as they choose a career. With data on individuals' test scores for multiple types of skills and work histories, we have a rich description of this process. We quantify the quality of one's occupational match and how it...

This paper studies the quantitative implications of wealth taxation (as opposed to capital income taxation) in an incomplete markets model with return rate heterogeneity across individuals. The key source of heterogeneity comes from the fact that some individuals have better entrepreneurial...

We extend the standard Eaton and Gersovitz (1981) sovereign default model to study bailout policies. In our setup a country that concentrates a significant fraction of bond holders decide on a period by period basis whether to bailout a debtor government. The combination of bailout policies and...

In this paper, we construct a parsimonious overlapping-generations model of human capital accumulation and study its quantitative implications for the evolution of the U.S. wage distribution from 1970 to 2000. A key feature of the model is that individuals differ in their ability to accumulate...