Jean Flemming
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Working Papers

Skill Accumulation in the Market and At Home                   R&R, Journal of Economic Theory
Abstract: An evolving outside option is introduced into a stochastic directed search model with skill loss during nonemployment. The theoretical model implies that average reemployment wages are only mildly sensitive to unemployment duration while the job finding probability is highly sensitive to duration, two facts documented in the literature. The calibrated model is used to decompose the declining hazard out of unemployment, implying a nontrivial role for duration dependence. The addition of aggregate shocks leads to an asymmetric response of the unemployment rate during and after recessions, with more severe recessions resulting in stronger hysteresis in labor force participation.
News and Macroprudential Policy                                    R&R, Journal of International Economics

(with Jean-Paul L'Huillier and Facundo Piguillem)

Abstract: Motivated by the deregulation of U.S. credit markets at the turn of the century, we analyze the cyclical properties of constrained optimal debt taxation in a quantitative model with systemic externalities. We focus on shocks to future income (news shocks), a salient feature of the U.S. economy during the late 1990s. In good times (positive news), it is optimal to allow for more borrowing in order to allow for consumption smoothing. When borrowing reaches a threshold, the economy enters a region where crises can occur. This pushes the Ramsey planner to tax borrowing. Thus, the constrained planner taxes borrowing in good times and when debt accumulation is high enough. Instead, in bad times, no taxation is necessary: agents anticipate that their income will be low and they save, escaping the possibility of a crisis. We contrast our findings to the case of standard, contemporaneous, shocks to income. Whereas under news shocks it is necessary to tax debt in good times, under contemporaneous shocks it is necessary to tax debt in bad times, when agents dig into their precautionary savings to smooth consumption. In a quantitative application to the U.S. economy from 1990 to 2015 we find that about half of the household leveraging can be judged as socially optimal from the perspective of a benchmark model.



Work in Progress

Costly Commuting and the Job Ladder  [Draft Coming Soon!]
Abstract: I study the interaction between commuting and employment in the data and within a spatial model of on-the-job search. I document the correlation between commuting time, job-to-job transitions, and earnings empirically. The theoretical model features a labor market in which individuals must commute in order to work, explicitly taking into account the distributions across both space and employment states. Wages and rent are jointly determined endogenously, giving rise to sorting across jobs and space. The rate of job-to-job transitions and wage gains within and between jobs depend crucially on the spatial elements of the model. Decomposing wage growth following job-to-job transitions into commuting and productivity changes suggests that dispersion in commuting can reconcile the coexistence of high dispersion in wage growth and a more concentrated productivity distribution.

Household Inequality and Firm Savings (with Marco Casiraghi)

Abstract: We document the link between household income inequality and financial asset holdings by firms in the U.S. data. Both aggregate corporate savings and those at the firm-level are positively associated with income inequality in the post-war period, with the observed rise in inequality accounting for a large share of the increase in firm savings in the last decades. We propose a simple mechanism of direct firm ownership in which financial assets are useful to fund capital investment, which is subject to a liquidity constraint. Higher income households value current consumption less, and thus choose to keep more assets to avoid being investment constrained in the future. An increase in income inequality leads to larger firm savings as it is associated with a higher concentration of firm ownership among richer households.


Untitled project (with Javier Fernandez-Blanco)