This paper develops a theoretical model to analyse how a General Purpose Technology (GPT) shapes within-group wage inequality when workers are ex-ante equal, but their adaptability to new technologies is subject to stochastic factors that are history dependent. It is argued that the diffusion of...

What shapes the optimal degree of progressivity of the tax and transfer system? On the one hand, a progressive tax system can counteract inequality in initial conditions and substitute for imperfect private insurance against idiosyncratic earnings risk. At the same time, progressivity reduces...

The estimation of dynamic factor models for large sets of variables has attracted considerable attention recently, due to the increased availability of large datasets. In this paper we propose a new parametric methodology for estimating factors from large datasets based on state space models and...

The estimation of structural dynamic factor models (DFMs) for large sets of variables is attracting considerable attention. In this paper we briefly review the underlying theory and then compare the impulse response functions resulting from two alternative estimation methods for the DFM....

This paper studies the joint dynamics of US output and unemployment rates in a nonlinear VAR model. The nonlinearity is introduced through a feedback variable that endogenously augments the output lags of the VAR in recessionary phases. Sufficient conditions for the ergodicity of the model,...

This paper analyses the use of factor analysis for instrumental variable estimation when the number of instruments tends to infinity. In particular, we focus on situations where many weak instruments exist and/or the factor structure is weak. Theoretical results, simulation experiments and...