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

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 the data country portfolios are heavily biased toward domestic assets. Standard one-good international macro models predict that, due to the presence of non-diversifiable labor income risk, country portfolios should be heavily biased toward foreign assets; this discrepancy constitute the...

In this paper, we construct the first constant-quality aggregate price index for the stock of residential land in the United States. In the process, we uncover four main results: (a) since 1970, residential land prices have risen nearly twice as fast, but also have been twice as volatile as...

This paper explores the macroeconomic and welfare implications of the sharp rise in U.S. wage inequality (1967-1996). In the data, cross-sectional earnings variation increased substantially more than wage variation, due to a sharp rise in the wage-hour correlation. At the same time, inequality...

I undertake a quantitative investigation into the short run effects of changes in the timing of proportional income taxes for model economies in which heterogeneous households face a borrowing constraint. Temporary tax changes are found to have large real effects. In the benchmark model, a...

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...

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...