WorldCat Identities

Werning, Iván

Works: 41 works in 173 publications in 1 language and 984 library holdings
Roles: Author
Classifications: HB1, 330.072
Publication Timeline
Most widely held works by Iván Werning
Liquidity and insurance for the unemployed by Robert Shimer( Book )

14 editions published in 2005 in English and held by 55 WorldCat member libraries worldwide

We study the optimal design of unemployment insurance for workers sampling job opportunities over time. We focus on the optimal timing of benefits and the desirability of allowing workers to freely access a riskless asset. When workers have constant absolute risk aversion preferences it is optimal to use a very simple policy: a constant benefit during unemployment, a constant tax during employment that does not depend on the duration of the spell, and free access to savings using a riskless asset. Away from this benchmark, for constant relative risk aversion preferences, the welfare gains of more elaborate policies are minuscule. Our results highlight two largely distinct roles for policy toward the unemployed: (a) ensuring workers have sufficient liquidity to smooth their consumption; and (b) providing unemployment benefits that serve as insurance against the uncertain duration of unemployment spells
Commitment vs. flexibility by Manuel Amador( Book )

12 editions published in 2003 in English and held by 43 WorldCat member libraries worldwide

This paper studies the optimal trade-off between commitment and flexibility in an intertemporal consumption/savings choice model. Individuals expect to receive relevant information regarding their own situation and tastes - generating a value for flexibility - but also expect to suffer from temptations - generating a value for commitment. The model combines the representations of preferences for flexibility introduced by Kreps (1979) with its recent antithesis for commitment proposed by Gul and Pesendorfer (2002), which nests the hyperbolic discounting model. We set up and solve a mechanism design problem that optimizes over the set of consumption/saving options available to the individual each period. We characterize the conditions under which the solution takes a simple threshold form where minimum savings policies are optimal. Our analysis is also relevant for other issues such as situations with externalities or the problem faced by a paternalistic planner, which may be important for thinking about some regulations such as forced minimum schooling laws. Keywords: Banking and credit, English Industrial Revolution, interest rate determination, credit rationing, technological change and learning. JEL Classifications: D82, E21, E61, D91, H55
Inequality, social discounting and estate taxation by Emmanuel Farhi( Book )

11 editions published in 2005 in English and held by 40 WorldCat member libraries worldwide

To what degree should societies allow inequality to be inherited? What role should estate taxation play in shaping the intergenerational transmission of welfare? We explore these questions by modeling altruistically-linked individuals who experience privately observed taste or productivity shocks. Our positive economy is identical to models with infinite-lived individuals where efficiency requires immiseration: inequality grows without bound and everyone's consumption converges to zero. However, under an intergenerational interpretation, previous work only characterizes a particular set of Pareto-efficient allocations: those that value only the initial generation's welfare. We study other efficient allocations where the social welfare criterion values future generations directly, placing a positive weight on their welfare so that the effective social discount rate is lower than the private one. For any such difference in social and private discounting we find that consumption exhibits mean-reversion and that a steady-state, cross-sectional distribution for consumption and welfare exists, where no one is trapped at misery. The optimal allocation can then be implemented by a combination of income and estate taxation. We find that the optimal estate tax is progressive: fortunate parents face higher average marginal tax rates on their bequests. Keywords: Inequality, Altruism, Private Information, Immiseration, Social Discounting, Optimal Taxation, Estate Taxes, Dynamic Programming. JEL Classifications: C61, C62, D30, D63, D64, D82, H21, H23, H24, H43
Crises and prices : information aggregation, multiplicity and volatility by Marios Angeletos( Book )

11 editions published in 2004 in English and held by 35 WorldCat member libraries worldwide

"Many argue that crises - such as currency attacks, bank runs and riots - can be described as times of non-fundamental volatility. We argue that crises are also times when endogenous sources of information are closely monitored and thus an important part of the phenomena. We study the role of endogenous information in generating volatility by introducing a financial market in a coordination game where agents have heterogeneous information about the fundamentals. The equilibrium price aggregates information without restoring common knowledge. In contrast to the case with exogenous information, we find that uniqueness may not be obtained as a perturbation from common knowledge: multiplicity is ensured when individuals observe fundamentals with small idiosyncratic noise. Multiplicity may emerge also in the financial price. When the equilibrium is unique, it becomes more sensitive to non-fundamental shocks as private noise is reduced"--National Bureau of Economic Research web site
On the optimal timing of benefits with heterogenous workers and human capital depreciation by Robert Shimer( Book )

10 editions published in 2006 in English and held by 29 WorldCat member libraries worldwide

This paper studies the optimal timing of unemployment insurance subsidies in a McCall search model. Risk-averse workers sequentially sample random job opportunities. Our model distinguishes unemployment subsidies from consumption during unemployment by allowing workers to save and borrow freely. When the insurance agency faces a group of homogeneous workers solving stationary search problems, the optimal subsidies are independent of unemployment duration. In contrast, when workers are heterogeneous or when human capital depreciates during the spell, the optimal subsidy is no longer constant. We explore the main determinants of the shape of the optimal subsidy schedule, isolating forces for subsidies to optimally rise or fall with duration
Reservation wages and unemployment insurance by Robert Shimer( Book )

9 editions published in 2006 in English and held by 28 WorldCat member libraries worldwide

This paper argues that a risk-averse worker's after-tax reservation wage encodes all the relevant information about her welfare. This insight leads to a novel test for the optimality of unemployment insurance based on the responsiveness of reservation wages to unemployment benefits. Some existing estimates imply significant gains to raising the current level of unemployment benefits in the United States, but highlight the need for more research on the determinants of reservation wages. Our approach complements those based on Baily's (1978) test
Progressive estate taxation by Emmanuel Farhi( Book )

9 editions published in 2006 in English and held by 23 WorldCat member libraries worldwide

For an economy with altruistic parents facing productivity shocks, the optimal estate taxation is progressive: fortunate parents should face lower net returns on their inheritances. This progressivity reflects optimal mean reversion in consumption, which ensures that a long-run steady state exists with bounded inequality - avoiding immiseration
Optimal savings distortions with recursive preferences by Emmanuel Farhi( Book )

8 editions published between 2007 and 2008 in English and held by 17 WorldCat member libraries worldwide

This paper derives an intertemporal optimality condition for economies with private information, focusing on a class of recursive preferences. By comparing it to the situation where agents can freely save in a risk-free asset market, we derive the optimal savings distortions necessary for constrained optimality. Our recursive preferences are homogeneous and satisfy a balanced growth condition, while allowing us to separate the role of risk aversion and intertemporal elasticity of substitution. We perform some quantitative exercises that disentangle the respective roles played by these two parameters play in opt8imal distortions and the implied welfare gains
Insurance and taxation over the life cycle by Emmanuel Farhi( Book )

5 editions published in 2011 in English and held by 7 WorldCat member libraries worldwide

We consider a dynamic Mirrlees economy in a life cycle context and study the op- timal insurance arrangement. Individual productivity evolves as a Markov process and is private information. We use a first order approach in discrete and continuous time and obtain novel theoretical and numerical results. Our main contribution is a formula describing the dynamics for the labor-income tax rate. When productivity is an AR(1) our formula resembles an AR(1) with a trend where: (i) the auto-regressive coefficient equals that of productivity; (ii) the trend term equals the covariance pro- ductivity with consumption growth divided by the Frisch elasticity of labor; and (iii) the innovations in the tax rate are the negative of consumption growth. The last prop- erty implies a form of short-run regressivity. Our simulations illustrate these results and deliver some novel insights. The average labor tax rises from 0% to 46% over 40 years, while the average tax on savings falls from 17% to 0% at retirement. We com- pare the second best solution to simple history independent tax systems, calibrated to mimic these average tax rates. We find that age dependent taxes capture a sizable fraction of the welfare gains. In this way, our theoretical results provide insights into simple tax systems -- National Bureau of Economic Research web site
Dealing with the Trilemma Optimal Capital Controls with Fixed Exchange Rates by Emmanuel Farhi( Book )

6 editions published in 2012 in English and held by 6 WorldCat member libraries worldwide

We lay down a standard macroeconomic model of a small open economy with a fixed exchange rate and study optimal capital controls (defined as maximizing the utility of a representative household). We provide sharp analytical and numerical characterizations for a variety of shocks. We find that capital controls are employed to respond to some shocks but not others. They are particularly effective to address risk-premium shocks that affect the interest rate differential foreign investors require in a particular country. We also discuss how the solution depends on the degree of nominal rigidity and the openness of the economy. We show that capital controls may be optimal even if the exchange rate is not fixed in response to risk premium shocks or if wages, in addition to prices, are sticky. Finally, we compare the single country's optimum to a coordinated world solution. Our results show a limited need for coordination. However, the uncoordinated solution features the same capital controls as the coordinated solution -- National Bureau of Economic Research web site
A Theory of Capital Controls as Dynamic Terms-of-Trade Manipulation by Arnaud Costinot( Book )

6 editions published in 2011 in English and held by 5 WorldCat member libraries worldwide

This paper develops a simple theory of capital controls as dynamic terms-of-trade manipulation. We study an infinite horizon endowment economy with two countries. One country chooses taxes on international capital flows in order to maximize the welfare of its representative agent, while the other country is passive. We show that capital controls are not guided by the absolute desire to alter the intertemporal price of the goods produced in any given period, but rather by the relative strength of this desire between two consecutive periods. Specifically, it is optimal for the strategic country to tax capital inflows (or subsidize capital outflows) if it grows faster than the rest of the world and to tax capital outflows (or subsidize capital inflows) if it grows more slowly. In the long-run, if relative endowments converge to a steady state, taxes on international capital flows converge to zero. Although our theory emphasizes interest rate manipulation, the country's net financial position per se is irrelevant -- National Bureau of Economic Research web site
Fiscal Unions by Ivn Werning( Book )

5 editions published in 2012 in English and held by 5 WorldCat member libraries worldwide

We study cross-country insurance in a currency union with nominal price and wage rigidities. We provide two results that build the case for the creation of a fiscal union within a currency union. First, we show that, if financial markets are incomplete, the value of gaining access to any given level of insurance is greater for countries that are members of a currency union. Second, we show that, even if financial markets are complete, private insurance is inefficiently low. A role emerges for government intervention in macro insurance to both guarantee its existence and to influence its operation. The efficient insurance arrangement can be implemented by contingent transfers within a fiscal union. The benefits of such a fiscal union are larger, the bigger the asymmetric shocks affecting the members of the currency union, the more persistent these shocks, and the less open the member economies -- National Bureau of Economic Research web site
Managing a Liquidity Trap Monetary and Fiscal Policy by Ivn Werning( Book )

6 editions published in 2011 in English and held by 5 WorldCat member libraries worldwide

I study monetary and fiscal policy in liquidity trap scenarios, where the zero bound on the nominal interest rate is binding. I work with a continuous-time version of the standard New Keynesian model. Without commitment, the economy suffers from deflation and depressed output. I show that, surprisingly, both are exacerbated with greater price flexibility. I examine monetary and fiscal policies that maximize utility for the agent in the model and refer to these as optimal throughout the paper. I find that the optimal interest rate is set to zero past the liquidity trap and jump discretely up upon exit. Inflation may be positive throughout, so the absence of deflation is not evidence against a liquidity trap. Output, on the other hand, always starts below its efficient level and rises above it. I then study fiscal policy and show that, regardless of parameters that govern the value of 'fiscal multipliers' during normal or liquidity trap times, at the start of a liquidity trap optimal spending is above its natural level. However, it declines over time and goes below its natural level. I propose a decomposition of spending according to 'opportunistic' and 'stimulus' motives. The former is defined as the level of government purchases that is optimal from a static, cost-benefit standpoint, taking into account that, due to slack resources, shadow costs may be lower during a slump; the latter measures deviations from the former. I show that stimulus spending may be zero throughout, or switch signs, depending on parameters. Finally, I consider the hybrid where monetary policy is discretionary, but fiscal policy has commitment. In this case, stimulus spending is typically positive and increasing throughout the trap -- National Bureau of Economic Research web site
Estate Taxation with Altruism Heterogeneity by Emmanuel Farhi( Book )

4 editions published in 2013 in English and held by 4 WorldCat member libraries worldwide

We develop a theory of optimal estate taxation in a model where bequest inequality is driven by differences in parental altruism. We show that a wide range of results are possible, from positive taxes to subsidies, depending on redistributive objectives implicit in the cardinal specification of utility and social welfare functions. We propose a normalization that is helpful in classifying these different possibilities. We isolate cases where the optimal policy bans negative bequests and taxes positive bequests, features present in most advanced countries -- National Bureau of Economic Research web site
Fiscal Multipliers Liquidity Traps and Currency Unions by Emmanuel Farhi( Book )

4 editions published in 2012 in English and held by 4 WorldCat member libraries worldwide

We provide explicit solutions for government spending multipliers during a liquidity trap and within a fixed exchange regime using standard closed and open-economy models. We confirm the potential for large multipliers during liquidity traps. For a currency union, we show that self-financed multipliers are small, always below unity. However, outside transfers or windfalls can generate larger responses in out- put, whether or not they are spent by the government. Our solutions are relevant for local and national multipliers, providing insight into the economic mechanisms at work as well as the testable implications of these models -- National Bureau of Economic Research web site
Slow moving debt crises by Guido Lorenzoni( Book )

5 editions published in 2013 in English and held by 2 WorldCat member libraries worldwide

What circumstances or policies leave sovereign borrowers at the mercy of self-fulfilling increases in interest rates? To answer this question, we study the dynamics of debt and interest rates in a model where default is driven by insolvency. Fiscal deficits and surpluses are subject to shocks but influenced by a fiscal policy rule. Whenever possible the government issues debt to meet its current obligations and defaults otherwise. We show that low and high interest rate equilibria may coexist. Higher interest rates, prompted by fears of default, lead to faster debt accumulation, validating default fears. We call such an equilibrium a slow moving crisis, in contrast to rollover crises where investor runs precipitate immediate default. We investigate how the existence of multiple equilibria is affected by the fiscal policy rule, the maturity of debt, and the level of debt. Keywords: debt crises, multiplicity, self-fulfilling crisis, sovereign debt. JEL Classification: E6, F3, F34
Efficiency and information transmission in bilateral trading by Robert Shimer( Book )

3 editions published in 2015 in English and held by 1 WorldCat member library worldwide

We study pairwise trading mechanisms in the presence of private information and limited commitment, whereby either trader can walk away from a proposed trade when he learns the trading price. We show that when one trader's information is relevant for the other trader's value of the asset, optimal trading arrangements may necessarily conceal the traders' information. While limited commitment itself may not be costly, it shapes how prices transmit information
Positive long run capital taxation : Chamley-Judd revisited by Ludwig Straub( Book )

3 editions published in 2014 in English and held by 1 WorldCat member library worldwide

According to the Chamley-Judd result, capital should not be taxed in the long run. In this paper, we overturn this conclusion, showing that it does not follow from the very models used to derive them. For the model in Judd (1985), we prove that the long run tax on capital is positive and significant, whenever the intertemporal elasticity of substitution is below one. For higher elasticities, the tax converges to zero but may do so at a slow rate, after centuries of high capital taxation. The model in Chamley (1986) imposes an upper bound on capital taxation and we prove that the tax rate may end up at this bound indefinitely. When, instead, the bounds do not bind forever, the long run tax is indeed zero; however, when preferences are recursive but non-additive across time, the zero-capital-tax limit comes accompanied by zero private wealth (zero tax base) or by zero labor taxes (first best). Finally, we explain why the equivalence of a positive capital tax with ever rising consumption taxes does not provide a firm rationale against capital taxation
Labor mobility within currency unions by Emmanuel Farhi( Book )

4 editions published in 2014 in English and held by 1 WorldCat member library worldwide

We study the effects of labor mobility within a currency union suffering from nominal rigidities. When the demand shortfall in depressed region is mostly internal, migration may not help regional macroeconomic adjustment. When external demand is also at the root of the problem, migration out of depressed regions may produce a positive spillover for stayers. We consider a planning problem and compare its solution to the equilibrium. We find that the equilibrium is generally constrained inefficient, although the welfare losses may be small if the economy suffers mainly from internal demand imbalances
A theory of macroprudential policies in the presence of nominal rigidities by Emmanuel Farhi( Book )

4 editions published in 2013 in English and held by 1 WorldCat member library worldwide

We provide a unifying foundation for macroprudential policies in financial markets for economies with nominal rigidities in goods and labor markets. Interventions are beneficial because of an aggregate demand externality. Ex post, the distribution of wealth across agents affect aggregate demand and the efficiency of equilibrium through Keynesian channels. However, ex ante, these effects are not privately internalized in the financial decisions agents make. We obtain a formula that characterizes the size and direction for optimal financial market interventions. We provide a number of applications of our general theory, including macroprudential policies guarding against deleveraging and liquidity traps, capital controls due to fixed exchange rates or liquidity traps and fiscal transfers within a currency union. Finally, we show how our results are also relevant for redistributive or social insurance policies, such as income taxes or unemployment benefits, allowing one to incorporate the macroeconomic benefits associated with these policies
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Alternative Names
Ivn Werning Argentine economist

Ivn Werning argentinischer konom und Professor am MIT

Werning, Ivan

Werning, Ivan 1974-

English (139)