Working papers

Abstract This paper advances a theory of unemployment hysteresis—transitory shocks leave permanent effects—based on a model of endogenous path-dependent wage rigidity under incomplete employment contracts. Workers’ relative wage comparisons—incumbents’ aversion to wage cuts and new hires’ concern with pay inequality—imply wage increases are partially irreversible, generating path dependence and asymmetry in wage adjustments. During recessions, hiring wages fail to adjust fully downward, depressing job creation and producing hysteresis effects and large unemployment fluctuations. A quantitative assessment shows that these effects can be significant under plausible calibrations of the cost of wage cuts and the sensitivity of workers to relative wages. A 1% transitory shock can generate a permanent increase in unemployment of about 0.5% to 15%, with benchmark values around 1.5–5.5%. The paper concludes by discussing the implications of the theory for the effectiveness of monetary policy and the empirical research on hysteresis effects, suggesting promising directions for future research.
Keywords Incomplete contracts, Wage rigidity, Irreversibility, Hysteresis, Unemployment
Download HAL Google Scholar
Abstract Despite growing calls to phase it out, oil exploration persists, often justified by the natural decline of existing fields and potential efficiency gains from discoveries. This paper quantifies the global welfare and environmental impacts of restricting oil exploration. We develop a global dynamic model calibrated to a granular dataset of 14,637 proven oilfields, accounting for heterogeneity in private extraction costs, capacity constraints, life-cycle carbon intensities of oil barrels, along with exploration dynamics and basin-specific estimates of yet-to-find resources. We find that exploration restrictions are an effective second-best climate policy: in the absence of a global carbon tax, a universal ban increases global welfare by$12.5 trillion due to lower social costs of oil production and use (assuming a social cost of carbon of$200/tCO2eq). A partial ban by OECD and BRICS countries alone captures 66% of these gains. Under optimal carbon pricing, however, a global ban yields a modest $0.3 trillion welfare loss, as it precludes access to lower-social-cost deposits and prevents the easing of short-run capacity constraints.
Keywords Stranded assets, Second-best, Ban, Carbon tax, Climate change, Oil exploration
Download HAL Google Scholar
Abstract Recessions are often accompanied by heightened uncertainty. We look at the effect of endogenous uncertainty on aggregate demand and its implications for monetary policy. We enrich a non-linear New-Keynesian model with imperfect noisy information, where the precision of signals is pro-cyclical. The endogenous uncertainty channel amplifies aggregate demand effects through precautionary saving. Ultimately, it can even reverse sign of the output-gap response to a supply shock. Monetary policy can eliminate both pricing and information-induced inefficiencies by closing the output gap. Based on U.S. household income forecast errors data, we estimate a sizable and significant degree of pro-cyclicality in the precision of signals.
Keywords Precautionary saving, Aggregate demand, Imperfect information, Endogenous uncertainty
Download HAL Google Scholar
Abstract Exchange rate pass-through (ERPT) is a key channel through which external shocks affect domestic inflation in open emerging market economies (EMEs). This paper estimates ERPT for Mexico using local projections with an instrumental-variable strategy to trace the cumulative effects of peso-dollar depreciations on consumer prices. The results indicate a relatively high degree of pass-through–higher than most estimates reported in the existing literature–suggesting that Mexican inflation responds more strongly to exchangerate movements than commonly assumed. Although price subcomponents display the expected heterogeneity (with goods showing the highest sensitivity and services the lowest), the main implication is clear: exchange-rate fluctuations remain a powerful driver of inflation dynamics, underscoring the policy relevance of monitoring currency volatility in open EMEs such as Mexico.
Keywords Exchange rate Pass-through, ERPT, EMEs, Mexico, Local projections, Inflation
Download HAL Google Scholar
Abstract Tis paper examines the efectiveness of France’s organized cancer screening programs by leveraging age-based eligibility thresholds to identify causal efects on screening uptake. Using 2019 telephone survey data matched with medico-administrative records from 1,411 women insured by MGEN, we employ a fuzzy regression discontinuity design to estimate Local Average Treatment Efects at program entry and exit ages. Our results reveal dramatic discontinuities in screening behavior: entering mammography screening eligibility at age 50 increases uptake probability by 59 percentage points (pp) (p
Keywords Cancer screening test uptake, Fuzzy regression discontinuity, Atitude towards risk
Download HAL Google Scholar
Abstract In order to investigate strategic interactions between a "global north" and a "global south" we introduce a two-country extension of the model in Golosov et al. (2014). We consider different transfers between the two regions, including transfers that can improve the abatement technology. Our model can accommodate several kinds of heterogeneity, including in preferences, time discount rates, and damages resulting from the stock of accumulated GHG. We solve for both planner's solutions and non-cooperative equilibria. We then calibrate our model in order to study quantitative differences between these solutions and to quantitatively explore the role of heterogeneity and Knightian uncertainty. We characterize emissions, damages, consumption, transfers, and welfare by computing the Nash equilibria of the associated dynamic game. We then compare these to efficiency benchmarks. Further, we investigate how (deep) uncertainty affects climate outcomes. We develop a general model for the study of optimal control and differential games that are linear-in-state, which we term the Integral Transformation Method (ITM), which encompasses several existing models as special cases.
Keywords Integral Transformation Method, Analytical integrated assessment model, Differential game, Climate policy, Robust control
Download HAL Google Scholar
Abstract The dynamics of capital distribution across space are an important topic in economic geography and, more recently, in growth theory. In particular, the spatial AK model has been intensively studied in the latter stream. It turns out that the positivity of optimal capital stocks over time and space for any initial capital spatial distribution has not been entirely settled even in the simple linear AK case. We use Ekeland’s variational principle together with Pontrya-gin’s maximum principle to solve an optimal spatiotemporal AK model with a state constraint (non-negative capital stock), where the capital law of motion follows a diffusion equation. We derive the necessary optimality conditions to ensure the solution satisfies the state constraints for all times and locations. The maximum principle enables the reduction of the infinite-horizon optimal control problem to a finite-horizon problem, ultimately proving the uniqueness of the optimal solution with positive capital and the non-existence of such a solution when the time discount rate is either too large or too small.
Keywords Diffusion and growth, Optimal control, State constraint, Ekeland&#039, s variational principle, Convergence
Download HAL Google Scholar
Abstract We link French households’ tax records to the corporations they control, and build a payout-policy–neutral income measure, with corresponding tax burdens including those of "billionaires": the top 0.0002%. De- fined as such, income is more concentrated than taxable income, it better predicts rich-list membership, and persists more among billionaires. Personal taxes remain progressive until the top 0.1%, but eventually decline to 2% of income. Corporate taxes are an imperfect progressive backstop, as total tax rates fall from 45% at the 0.1% threshold to 25% for billionaires. Among these, the tax burden is global and tax-efficient pyramidal control over businesses ubiquitous.
Keywords Corporate tax, Business Income, Tax progressivity, Income distribution
Download HAL Google Scholar
Abstract This paper studies the main determinants of bilateral financial flows in the euro area to achieve sustainable and fair financing opportunities. We revisit the modern theory of the optimal currency area considering the impact of heterogeneity in inequality measures, within and across countries, on crossborder financial flows. To do so, we introduce financial and social fragmentation in gravity models of European capital flows. We use data from 19 Eurozone countries from 2000 to 2021 and show how fragmentation impacts capital flows, namely foreign direct investment, cross-border loans as well as portfolios, equity and bond flows. Since capital is, in principle, free to flow in the Eurozone, our analysis directly identifies the roles of potential sources of fragmentation: social inequalities, lack of market openness, and domestic regulations such as macroprudential controls. Overall, our results show that financial integration in Europe entails more capital flows of any type while social fragmentation across European countries is detrimental to capital flows, no matter which type. This is strong evidence of the importance of financial and social fragmentation in the Eurozone on the distribution of capital.
Download HAL Google Scholar
Abstract We provide a comprehensive picture of the change in the health status for the self-employed aged 50 and upwards in Europe. We find that self-employed workers are in better physical health than employees at younger ages, due potentially to a selection effect. We also find a negative effect of self-employment status on objective health, leading to worse physical conditions at older ages, despite a catching-up of healthcare consumption after retirement. The examination of the evolution of the self-employed healthcare consumption enables us to distinguish two components: an intense health restoration effect and a regular one, corresponding to two distinct periods in their life. We interpreted the former effect as the increased probability of the self-employed to be hospitalized during their careers, meaning that the self-employed seek care later or for serious reasons only. The latter effect or the regular restoration effect meaning a greater number of medical visits for the self-employed after retirement which is potentially due to a reduction in the opportunity cost of the use of healthcare resources.
Keywords Self-employment, Health status, Health care consumption, SHARE survey
Download HAL Google Scholar