*Despite the high prevalence of developing economies implementing place-based policies, the existing literature has predominantly focused on examining their effects in developed economies. Nevertheless, the experience with place-based policies in developed countries can hardly be transferred to less-developed economies where a substantial share of their labor force is employed informally. To shed light on these, this paper studies the local economic impact of the Free Economic Zones (FEZs) program established in Colombia between 2005-2018. Based on a novel data set that combines georeferenced data on FEZs, municipalities, and household characteristics, I measure the spatial effects of the creation of these zones on labor market outcomes, focusing on informality. Results show that the FEZs establishment significantly increases local employment by increasing informality, with positive spillovers to the nearby regions, decreasing with distance. To explain these findings, I develop a spatial structural model with informality, internal trade, and labor mobility, providing two channels: (i) the formalization channel that increases the proportion of formal firms and (ii) the entry channel resulting in an increase in firm entry, mainly driven by informal firms. I aim to quantify the model and provide some counterfactual analysis.

**Episodes of low natural interest rates, even transitory, pose a challenge to monetary policy by possibly causing the effective lower bound on the policy rate to bind. Those episodes are more likely to occur not only when the natural rate is low on average but also when fluctuations around its average level are large. In this paper, we study the responsiveness of the natural interest rate to structural aggregate shocks affecting the aggregate supply of and demand for savings. Using a quantitative overlapping-generations model, we trace back this responsiveness to the slopes of aggregate savings supply and demand curves and show that both curves have flattened over the past four decades in the U.S. This implies a greater sensitivity of the natural rate to structural shocks affecting the supply of and demand for aggregate saving.