Postdoctoral Researcher in Economics

Goethe University Frankfurt

I am a postdoctoral researcher at Goethe University Frankfurt.

Research interests: Macroeconomics, income distribution, income risk, fiscal policy

Contact: gruebener@econ.uni-frankfurt.de.

Research

Working Papers


On the optimal design of transfers and income-tax progressivity

We study the optimal design of means-tested transfers and progressive income taxes. In a simple analytical model, we show that adding a transfer to a log-linear tax induces welfare gains almost as large as in the second-best allocation. Transfers allow for more progressive average than marginal tax-and-transfer rates, achieving redistribution while preserving efficiency. In a rich dynamic model, we quantify the optimal fiscal plan. We use new flexible functions featuring targeted transfers and progressive income taxes, delivering a good empirical fit across the income distribution. Transfers should be larger than currently in the U.S. and financed with moderate income-tax progressivity.

Accepted at the Journal of Political Economy: Macroeconomics

(with Axelle Ferriere, Gaston Navarro, and Oliko Vardishvili)

Paper


Work in Progress

Joint Search over the Life Cycle

This paper studies how the added worker effect - intra-household insurance through increased spousal labor market participation - varies over the life-cycle. We show in U.S. data that the added worker effect is much stronger for young than for old households. A stochastic life-cycle model of two-member households with job search in a frictional labor market is capable of replicating this finding. The model suggests that a lower added worker effect for the old is driven primarily by better insurance through asset holdings. Human capital differences between employed young and old contribute to the difference but are quantitatively less important, while differences in job arrival rates play a limited role.

(with Annika Bacher and Lukas Nord)

Paper

Firm Dynamics and Earnings Risk

We study the sources of individual earnings risk in frictional labor markets, focusing on the role firms play for their workers’ earnings risk. First, using administrative matched employer-employee data from Denmark, we document key properties of the worker earnings growth distribution, the firm revenue growth distribution, and their joint distribution. The worker earnings and firm revenue growth distributions exhibit strong deviations from normality, in particular excess kurtosis, with many workers and firms experiencing very small changes to their earnings/revenues, but a significant minority experiencing very large changes. Large earnings losses are more likely for workers in firms with negative revenue growth, driven both by separations to unemployment and earnings losses on the job. Second, we develop a model framework consistent with the data, with four key features: i) frictional labor markets and on the job search to capture unemployment risk and wage growth through a job ladder, ii) multi-worker firms to capture gross and net worker flows, iii) risk averse workers such that earnings risk matters, and iv) contracting with two-sided limited commitment because earnings of job stayers are changing infrequently in the data. Third, we use the model to explore policies designed to mitigate earnings fluctuations.

(with Filip Rozsypal)

Optimal Redistribution: Rising Inequality vs. Rising Living Standards

Both per capita income and inequality have been rising in the U.S. since the 1950s. In the workhorse models of optimal income taxation, larger inequality calls for a more redistributive welfare state over time. Yet, the level of income -- what standard of living the poor can afford -- plays no role for optimal taxes in these homothetic models. This paper integrates the optimal income tax problem into a structural change general equilibrium model with non-homothetic preferences. In this setup, growth affects the equity-efficiency trade-off in two ways: (i) it increases the skill premium, calling for more redistribution; and (ii) it decreases the share of necessities in consumption baskets of the poor, calling for less redistribution. We quantify this model for the U.S. 1950-2010. Even though inequality was rising substantially in this period, we find that the ``level'' effects significantly dampen the desired increase in redistribution.

(with Axelle Ferriere and Dominik Sachs)