Jean Flemming
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Macro-Prudential Taxation in Good Times

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

Forthcoming, Journal of International Economics
Replication Files
Abstract: We analyze the optimal macroprudential policy under the presence of persistent permanent shocks, which convey information about future growth. In this context, crises are characterized by long periods with positive shocks that eventually revert, rendering the collateral constraint binding and triggering deleveraging. In this environment it is optimal to tax borrowing during good times, and let agents act freely leaving the allocations undistorted, including borrowing and lending, when the economy reverts to a bad state. We contrast our findings to the case of standard shocks to the level of income, where it is optimal to tax debt in bad times, when agents need to borrow the most for precautionary savings motives. Also, taxes are used much less often and are around one-tenth of those under level shocks.
Working Papers

Costly Commuting and the Job Ladder

    Abstract: Even though workers in the UK spent just £1,000 on commuting in 2017, the economic loss may be far higher because of the congestion externality arising from the way in which one worker's commute affects the commuting time of others. I provide empirical evidence that commuting time affects job acceptance, pointing to large indirect costs of congestion. To interpret the empirical facts and quantify the costs of congestion, I build a novel model featuring a frictional labor market within a metropolitan area. This is the first paper to endogenize commuting congestion in a labor search model, which is necessary to understand labor market responses to urban policies. Workers evaluate job offers based on their productivity and commuting costs, taking congestion as given, but by accepting and commuting to distant jobs, affect other workers' labor market outcomes. By allowing for residential and job-to-job mobility, the model highlights how moving decisions, housing rent, and wages are linked to congestion. Calibrating the model to the local labor market around London, I show that the effect of the congestion externality is to significantly decrease welfare and increase wage inequality. I quantify the effects of a congestion tax on labor market outcomes, and show that the welfare-maximizing tax has substantial negative effects on inequality, but comes at a cost of higher unemployment.

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.

Work In Progress

Optimal Insurance Against Long-Term Consequences of Job Loss

(with Javier Fernandez-Blanco)


Household Inequality and Firm Savings

(with Marco Casiraghi and Facundo Piguillem)