Essays in macroeconomics [electronic resource]
Keywords: Economics.

This dissertation contains three essays on macroeconomics and optimal redistributive schemes. The first chapter studies two channels through which exchange rate policy affects the real economy. First, if nominal wages do not decrease during a recession, a nominal devaluation of the currency -- as opposed to a fixed exchange rate -- reduces unemployment by lowering wages in real terms. However, if not all wages are equally rigid, sectoral labor markets respond differently under different exchange rate regimes, and redistributive effects arise. Second, nominal devaluations can have an effect on the real value of nominal asset positions. The desirability of a nominal devaluation is analyzed in the context of a quantitative small open economy model. The model features heterogeneous workers and sectoral labor markets that differ in the degree of nominal rigidities. Using data from Argentina, I estimate the model to match aggregate and worker-level moments regarding labor market choices. The model predicts that fixed exchange rate regimes reduce employment and welfare during a recession. A devaluation that does not affect the real value of workers' nominal positions improves the overall well-being of workers, but entails a redistribution of welfare across certain groups of workers. Revaluation effects can be strong enough to overcome the labor market gain of a nominal devaluation. The second chapter is co-authored with Diego Perez. When setting prices firms use idiosyncratic information about the demand for their products as well as public information about the aggregate macroeconomic state. This chapter provides an empirical assessment of the relationship between the availability of public information about inflation and price setting. We exploit an event in which agents lost access to information about the inflation rate: the manipulation of inflation statistics that occurred in Argentina starting in 2007. Our difference-in-difference analysis reveals that this policy had associated an increase in the coefficient of variation of prices of 13% with respect to its mean. This effect is analyzed in the context of a quantitative general equilibrium model in which firms use information about the inflation rate to set prices. Consistent with empirical evidence, we find that monetary policy becomes more effective with less precise information about inflation. Not reporting accurate measures of the CPI entails significant welfare losses, especially in economies with volatile monetary policies. The final chapter is co-authored with Ricardo Perez-Truglia. In it we study the role of fairness concerns in the demand for redistribution through workfare. In the first part of the paper, we present new evidence from a survey experiment. We show that individuals are more generous towards poor people whom they perceive to be diligent workers relative to poor people whom they perceive to be non-diligent, a social preference that we label sympathy for the diligent. This preference is much stronger than preferences regarding other characteristics of the poor, such as race, nationality, and disability. More important, we show that subjects with higher sympathy for the diligent have a stronger preference for workfare programs. In the second part of the paper, we incorporate our empirical findings into a model of income redistribution. We consider the case of a benevolent government with fairness concerns that prioritizes the well-being of individuals who exert the most effort. We characterize the optimal conditions under which the government introduces work requirements. Even if wasteful, work requirements can be optimal, because they allow for a better distinction between individuals who exert great effort and individuals who do not. However, if the government lacks commitment power, the availability of screening through work requirements leads to a lower equilibrium effort and, possibly, a Pareto-dominated allocation.