"In recent decades, the US wage structure has been transformed by a rising college premium, a narrowing gender gap, and increasing persistent and transitory residual wage dispersion. This paper explores the implications of these changes for cross-sectional inequality in hours worked, earnings...

Using a model with constant relative risk-aversion preferences, endogenous labor supply and partial insurance against idiosyncratic wage risk, we provide an analytical characterization of three welfare effects: (a) the welfare effect of a rise in wage dispersion, (b) the welfare gain from...

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...

This paper studies consumption and labor supply in a model where agents have partial insurance and face risk and initial heterogeneity in wages and preferences. Equilibrium allocations and variances and covariances of wages, hours and consumption are solved for analytically. We prove that all...

Macroeconomics is evolving from the study of aggregate dynamics to the study of the dynamics of the entire equilibrium distribution of allocations across individual economic actors. This article reviews the quantitative macroeconomic literature that focuses on household heterogeneity, with a...

In recent decades, the US wage structure has been transformed by a rising college premium, a narrowing gender gap, and increasing persistent and transitory residual wage dispersion. This paper explores the implications of these changes for cross-sectional inequality in hours worked, earnings and...

Using a model with constant relative risk-aversion preferences, endogenous labor supply and partial insurance against idiosyncratic wage risk, we provide an analytical characterization of three welfare effects: (a) the welfare effect of a rise in wage dispersion, (b) the welfare gain from...