Centro Atlántico de Estudios Ríos Pérez


  • Publications of CAERP members
    1. Desigualdad, ¿Qué sabemos? José Víctor Ríos Rull. In this article (in Spanish) I review the state of the art of our knowledge of what factors account wealth and income inequality among households. Specifically, I claim how uninsurable shocks to income can by themselves account for the observed wealth inequality. Investigaciones Económicas. Vol. XXVI (2), 2002, 221-254.

    2. Accounting for Earnings and Wealth Inequality August 2002 version. Joint with Ana Casta~neda, Javier Diaz-Gimenez y José Víctor Ríos Rull. We show that a theory of earnings and wealth inequality based on the optimal choices of ex-ante identical households who face uninsured idiosyncratic shocks to their endowments of e.ciency labor units accounts for the U.S. earnings and wealth inequality almost exactly. Relative to previous work, we make three major changes to the way in which this basic theory is implemented: (i) we mix the main features of the dynastic and the life-cycle abstractions, that is, we assume that our households are altruistic, and that they go through the life-cycle stages of working-age and of retirement; (ii) we model explicitly some of the quantitative properties of the U.S. social security system; and (iii) we calibrate our model economies to the Lorenz curves of U.S. earnings and wealth as reported by the 1992 Survey of Consumer Finances. Furthermore, our theory succeeds in accounting for the observed earnings and wealth inequality in spite of the disincentives created by the mildly progressive U.S. income and estate tax systems, that are additional explicit features of our model economies. Forthcoming, Journal of Political Economy.

    3. Updated Facts on the U.S. Distributions of Earnings, Income and Wealth. Santiago Budria, Javier Diaz-Gimenez, Vincenzo Quadrini, y José Víctor Ríos Rull. We provide some facts about inequality based on the most recent data available (1998 SCF). Federal Reserve Bank of Minneapolis Quarterly Review, Summer 2002, Vol. 26, No. 3, pp. 2-35.

    4. Default and Aggregate Fluctuations in Storage Economies. Makoto Nakajima y José Víctor Ríos Rull. In this paper we extend Chatterjee, Corbae, Nakajma and Rios-Rull (2001) to include aggregate real shocks to economic activity. The model, that includes agents that borrow and lend, and that has endogenous default and credit limits, allows us to explore the extent to which aggregate events are amplified or smoothed via the mechanism of household bankruptcy filings. In the model agents are subject to shocks to earnings opportunities, to preferences and to their asset position and borrow and lend to smooth consumption. On occasion, the realization of the shocks are bad enough that agents take advantage of the opportunities provided by the U.S. Bankruptcy Code and file for bankruptcy which wipes out their debt at the expense of both being banned from borrowing for a certain amount of time and of incurring in transaction costs. The incentives to default are time varying and depend on general economic conditions. The model is quantitative in the sense that its fundamental parameters are estimated using U.S. data, and the model can replicate the aggregate conditions of the U.S. economy. We show that the model accounts for the very high number of bankruptcies in the last few years, and report the statistics produced by the model economies with various aggregate shocks. Based on the outputs, we analyze the reaction of households to various aggregate real shocks, and discuss the aggregate implications of the reaction and the direction that the model might be further extended to. Forthcoming in a volume in honor of Herbert Scarf.

    5. College Attainment of Women. José Víctor Ríos Rull y Virginia Sanchez Marcos. Up to the late seventies, the Sex College Attainment Ratio (SCAR) or ratio of college attainment between men and women was about 1.6. Assortative mating within education groups in marriages is strong enough in the U.S. to prevent accounting for the SCAR feature based on males’ higher earnings. We document the puzzling nature of the SCAR, and we explore various theories to account for it. Our main finding is that if parents’ wellbeing is affect by the number of grandchildren, gender differences in the steepness of the negative relation between educational attainment and number of children provides the best theory in accounting for the SCAR. Review of Economic Dynamics Volume 5, Issue 4, Pages 965-998 (October 2002).

    6. Implementing the 35 Hour Workweek by Means of Overtime Taxation Victoria Osuna y José Víctor Ríos Rull. In this paper we study the implications of taxing overtime work in order to reduce the workweek. To this purpose we study the roles played by team work, commuting costs and idiosyncratic output risk in determining the choice of the workweek. In order to obtain reliable estimates of the consequences of our policy experiment, we calibrate our model economy to the substitutability between overtime and employment using business cycle information. We find that a tax-rate of 12% of overtime wages implements the desired reduction of the workweek form 40 to 35 hours (12.5%). We also find that this tax change increases employment by 6.7% and reduces output and productivity by 10.2 and 4.1%, respectively. We also study a model economy with cross-sectional variations in the workweek that arise from plant-specific output risk and we find that in this model economy the taxrates needed to achieve the same workweek reduction are significantly larger. Finally, we find that taxing overtime dampens the business cycle fluctuations and that its welfare costs seem to be very large. Forthcoming, Review of Economic Dynamics.

    7. Habit Formation: Implications for the Wealth Distribution Antonia Diaz, Josep Pijoan-Mas y José Víctor Ríos Rull. We study the role of habit formation in shaping the amount of precautionary savings and the wealth distribution in heterogeneous agents model economies with idiosyncratic uncertainty. We adjust preferences to equate the Intertemporal Elasticity of Substitution in all model economies. We find that habit formation brings a hefty increase in precautionary savings and very mild reductions in the coe±cient of variation and in the Gini index of wealth. These findings hold for both persistent and non persistent habits, with the effects of the former being much larger. Forthcoming, Journal of Monetary Economics.

    8. Time-Consistent Optimal Fiscal Policy. Paul Klein y José Víctor Ríos Rull. This paper studies the properties of optimal fiscal policy in a stochastic growth model when the government cannot commit itself beyond the next period's capital income tax rate. We find that the properties of optimal fiscal policy in this case differ dramatically from those of the full commitment solution. In particular, (i) capital income tax rates are very high (65% on average versus close to zero on average under full commitment), (ii) labor income taxes are rather low on average (about 12% versus a value of around 31% under full commitment), and (iii) labor income taxes are volatile (in some cases its coefficient of variation is higher than that of the capital income tax rate), while under full commitment their standard deviations are essentially zero. Forthcoming, International Economic Review.

    Last modified: Wed Dec 31 21:33:43 Eastern Standard Time 2003