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Essays on incomplete markets and aggregate shocks
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The first chapter explores how income inequality affects fiscal consolidation multipliers.
Higher labor income risk induces more precautionary savings and consequently a lower percentage of constrained agents. As these agents have lower labor supply elasticity, this explains the positive correlation between multipliers and inequality. The second chapter explores the nonlinearity of the fiscal multiplier. We find the multiplier to be increasing on the size of the shock. This is explained by the impact these shocks have on the wealth distribution.
The last chapter explores the consequences of non-financial firms’ savings portfolio in the propagation of aggregate shocks. Firms with more risky assets drop investment by more during recessions but grow faster during expansions, amplifying the business cycle.
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Fiscal Multipliers Business Cycle Heterogeneous Households Heterogeneous Firms