Households in emerging economies are subject to significant income risk and have low access to financial markets. Leveraging multiple administrative microdata sources, this paper documents significant heterogeneity in asset holdings, income, and income cyclicality across the distribution of...

This paper studies wage flexibility as a means to absorb adverse shocks. We focus on economies with unequal access to financial markets and where the monetary authority is constrained by the zero lower bound. We show that in this particular setting the economy can become more volatile when wages...

This paper studies the role of wage and price rigidities in determining aggregate demand. With incomplete markets, real wages determine consumption. In response to shocks, wages and prices may not respond evenly, affecting how shocks transmit to aggregate demand. Motivated by these observations,...