What are idiosyncratic shocks and how do people respond to them? This paper starts from the observation that idiosyncratic shocks are experienced at the individual level, but responses to shocks can encompass the whole household. Understanding and accurately modeling these responses is essential...

Non-stationary income processes are standard in quantitative life-cycle models, prompted by the observation that within-cohort income inequality increases with age. This paper generalizes Tauchen (1986) and Rouwenhorst's (1995) discretization methods to non-stationary AR(1) processes. We...

We study the socio-economic gradient of child development on a representative sample of low- and middle-income children aged 6-42 months in Bogota, using the Bayley Scales of Infant Development, a high quality test based on direct observation of the child's abilities. We find a statistically...

We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic...

We use matched employer-employee data from Sweden to study the role of the firm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We find that firm-specific permanent productivity shocks transmit to individual wages, but the...

We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects...