Research

Working Papers

Population Aging in Advanced and Emerging Economies: Capital Flows and Fiscal Spillovers – latest draft

This study investigates the fiscal effects of population aging in a setting where demographic trends are not synchronized across two different regions: advanced and emerging economies. Much attention has been given to the fiscal effects of demographic change and the need for social security reform; however, most of the literature either uses closed economies or focus exclusively on the consequences to advanced economies. This paper changes the focus: what were the fiscal consequences to emerging economies of population aging in advanced economies? What is the future fiscal impact as emerging economies age and catch up with advanced economies’?

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Demographics and Real Interest Rates Across Countries and Time (with Carlos Carvalho, Andrea Ferrero and Fernanda Nechio) – latest draft

We explore the implications of demographic trends for the evolution of real interest rates across countries and over time. To that end, we first develop a tractable two-country general equilibrium model with imperfect capital mobility and country-specific demographic trends. We calibrate the model to study how low-frequency movements in a country’s real interest rate depends on its own demographics and on global factors, given a certain degree of financial integration. The more financially integrated a country is, the higher the sensitivity of its real interest rate to global developments, and the less its own real rate determinants matter. We then estimate panel error-correction models relating real interest rates to possible determinants—demographics included— imposing some restrictions motivated by lessons from the structural model. Our empirical evidence supports a meaningful role for life expectancy in determining real interest rates.

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The Macroeconomics of Neighborhood Effects (with Ricardo Marto) – latest draft

We use micro-level data on high school students from Brazil to estimate the importance of neighborhood effects. We rank neighborhoods by their income level and find that neighborhood effects are stronger in richer districts than in poor ones. Poor neighborhoods, on the other hand, tend to have stronger classroom peer effects. We then build an overlapping generations model with distinct neighborhoods to examine the dynamics of segregation, wealth accumulation, and intergenerational mobility. Neighborhoods shape the skills a child is born with and her labor earnings once she becomes an adult. Hence, parents have to trade off higher rental prices today for a higher probability of their children being skilled. We show that the presence of borrowing constraints traps some individuals in the inferior neighborhood, while wealthier households compensate low earnings with more bequests.

Policy Briefs

Principles-Based Illustrative Reforms of Federal Tax and Spending Programs (with many others)

Media coverage: Washington Post

Taxing Foreign Affiliates of U.S.-Domiciled Firms (with Lysle Boller and Jon Huntley)