Summersemester 2025

Economists disagree about the factors driving the substantial increase in residual wage inequality in the US over the past few decades. To identify changes in the returns to unobserved skills, we make a novel assumption about the lifecycle dynamics of skills, which we validate using data on test score dynamics for older workers in the HRS. Using survey data from the PSID and administrative data from the IRS and SSA, we estimate that the returns to unobserved skills declined substantially in the late-1980s and 1990s despite an increase in residual inequality. Extending our framework to consider occupational differences in returns to skill and multiple unobserved skills, we further show that skill returns display similar patterns for workers employed in each of cognitive, routine, and social occupations. Finally, our results suggest that increasing skill dispersion, driven by rising skill volatility, explains most of the growth in residual wage inequality since the 1980s.

Search frictions in the product market have been widely studied as a foundation of monetary theory. More recently, they have also been advanced as a possible explanation for demand-side fluctuations. This paper develops a monetary model with product market search frictions to evaluate the quantitative relevance of these frictions to the short-term effects of monetary policy on output. In the model, due to matching uncertainty in the product market, firms operate with unutilized capacity and households carry unused liquidity, and changes to the nominal interest rate have effects on output. I discipline the degree of matching uncertainty by its implications on money velocity and capacity utilization. Absent matching uncertainty, a one percent reduction in the nominal interest rate increases consumption by 0.07%. Matching uncertainty can amplify this effect by a factor of four.

The timing of transfers is critical to their value for recipients. Thus, although the bulk of family transfers occurs in the form of inheritances, inter-vivos trans- fers may be far more valuable than their size suggests. To uncover the economic importance of inter-vivos transfers to recipients, we propose a tractable lifecy- cle model of the family capable of reproducing salient features of the data. We then use the model to address the consumption insurance puzzle based on Blun- dell et al. (2008). The model has the potential to narrow the gap between actual consumption insurance in the data and that predicted by standard incomplete- markets models. The model may also provide a novel rationale for the preferen- tial tax treatment of inter-vivos transfers relative to bequests.

--------------------------------------------------tba--------------------------------------------------

--------------------------------------------------tba--------------------------------------------------

--------------------------------------------------tba--------------------------------------------------

--------------------------------------------------tba--------------------------------------------------

--------------------------------------------------tba--------------------------------------------------

--------------------------------------------------tba--------------------------------------------------

--------------------------------------------------tba--------------------------------------------------

--------------------------------------------------tba--------------------------------------------------