paulo.decarvalholins@rochester.edu
PhD Candidate
University of Rochester
Rochester-NY
CV
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About
I am an Econ Ph.D. Candidate at the University of Rochester.
I will join the Department of Economics at Clemson University as an assistant professor in Fall 2024.
My research interests are in macroeconomics and labor economics.
Working Papers
"Consumption's Response to Permanent Income: The Role of Consumption Commitments",
November 2023.
[Abstract]
The textbook permanent-income hypothesis predicts that the level of consumption is proportional to the level of permanent income, while,
in the data, the elasticity of consumption to permanent income appears to be far below one. In this paper, I provide evidence for a novel
theory for this consumption under-response to permanent income based on consumption commitments -- hard-to-adjust consumption
choices that resemble long-term commitments. Empirically, I document four main new facts that support the theory: (a) the consumption
elasticity to permanent income is larger for younger households, (b) it depends on past income trajectories, and (c) it becomes larger
after households adjust their commitments; furthermore, I show that (d) those households that have "under-responded" to their income
growth skew spending away from hard-to-adjust goods (notably shelter). These facts are evidence in favor of household "lock-in" to past
consumption choices. Quantitatively, I show that consumption commitments are necessary for life-cycle models to account for all the documented facts.
"Inflation Targeting under Fiscal Fragility"
(together with Aloísio Araujo, Victor Costa, Rafael Santos, Serge de Valk), August 2023.
Revise and resubmit AEJ: Macroeconomics.
[Abstract]
We study the inflation target level decision under a high government debt burden. Lower targets allow for lower on-target inflation but increase
the temptation to use extra inflation to generate fiscal revenue. We model this trade-off in an economy with an altruistic policymaker choosing
debt and public expenditure on behalf of private agents whom finance expenditures and form inflation expectations rationally. For low debt levels,
the inflation target is credible and always delivered. For high debt, the target is not credible and never delivered. In-between, the target may be
delivered or not, leading to above-target expectations and expensive debt rollovers. We show that rollover costs are lower when the inflation target
is higher. Our model implies that the optimal inflation target depends on debt levels.
Publications
"The Quality-Adjusted Cyclical Price of Labor"
(together with Mark Bils, Marianna Kudlyak), Journal of Labor Economics, October 2023.
[Abstract]
We estimate cyclicality in labor's user cost allowing for cyclical fluctuations in the quality of worker-firm matches and wages that are smoothed within employment matches.
To do so, we exploit a match's long-run wage to control for its quality. Using NLSY data for 1980 to 2019, we identify three channels by which recessions affect user cost:
It lowers the new-hire wage; it lowers wages going forward in the match; but it also results in higher subsequent separations. All totaled, we find that labor's user cost
is highly procyclical, increasing by more than 4% for a 1 pp decline in unemployment.
"Current Constraints on Growth"
(together with Armando Castelar Pinheiro), In: Antonio Spilimbergo and Krishna Srinivasan, editors, Brazil: Boom, Bust, and the Road to Recovery, IMF, March 2019.
[Book]
Work in Progress
"Labor Demand and Firms' Discount Rates" (Approved by the Census Bureau)
"Growing up with an Unemployed Mother" (together with Nataliya Gimpelson)
"Human Capital, Career Choice, and the Hours Profile Over the Life-Cycle"
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