carlos urrutia - Academia.edu (original) (raw)

Papers by carlos urrutia

We build a two sector, dynamic general equilibrium model of a small open economy with traded an n... more We build a two sector, dynamic general equilibrium model of a small open economy with traded an non-traded goods, heterogeneous …rms and credit constraints. Firms face a working capital constraint in order to purchase intermediate goods, and face a borrowing limit for investment depending on their net worth. The model combines a …nancial accelerator mechanism with sectoral allocation of resources and balance sheet e¤ects. We calibrate the model using data from Mexico, from 1989 to 2000, and analyze the e¤ect of the 1994 crisis modeled as an unexpected sudden stop of foreign loans. The model predicts: (i) a current account reversal, (ii) a real exchange rate depreciation, (iii) a drop in output and TFP, and (iv) a large decline in investment. Moreover, the model predicts a deeper recession and a slower recovery for the non-traded sector. These real e¤ects are consistent with the evidence for the 1994 Mexican crisis.

Review of Economic Dynamics, 2011

Financial crises in emerging economies are accompanied by a large fall in total factor productivi... more Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of …nancial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working capital constraint to the purchase of intermediate goods.

Journal of Development Economics, 2004

We build a partial equilibrium model of firm dynamics under exchange rate uncertainty. Firms face... more We build a partial equilibrium model of firm dynamics under exchange rate uncertainty. Firms face idiosyncratic productivity shocks and observe the current level of the real exchange rate each period.

American Historical Review, 1970

We develop a model of optimal dynamic labor contracts in which firms provide training to workers,... more We develop a model of optimal dynamic labor contracts in which firms provide training to workers, but workers cannot credibly commit to stay with the firm. The training is in the form of skills which can profitably be used in other job matches. In the model, wage rates rise with seniority and separation rates are higher for low skilled workers than for high skilled workers. These observations are consistent with the evidence. We show that firing costs (i) increase the average duration of employer-worker matches, (ii) reduce the outside value of the worker, and (iii) increase the level of training provided by the firm. This mechanism has the opposite effect on measured productivity than the selection mechanism of search models with endogenous separation, where firing costs reduce the average quality of active matches. Our model provides a rationale for the positive relationship observed between the level of employment protection and TFP across European countries. † Preliminary and incomplete, comments welcome. Contact Information: currutia@itam.mx.

Recent empirical evidence for the U.S. indicates a high degree of intergenerational persistence i... more Recent empirical evidence for the U.S. indicates a high degree of intergenerational persistence in economic status. Assessing the effectiveness of various public policies in reducing persistence and equalizing opportunities in society requires measures of the contribution of major sources of persistence. In this paper we provide a quantitative model of intergenerational human capital transmission and earnings inequality that focuses on three sources of persistence: innate ability, early education, and college education. We find that about half of the intergenerational persistence and one fourth of the cross-sectional inequality in permanent earnings are accounted for by parental investments in education. Our model implies that early education accounts for most of the persistence generated by parental investments while college education accounts for most of the inequality. We show that these results have important implications for education policy. Our model indicates that a 20% increase in public resources devoted to early education has a 10% increase on earnings mobility while a similar increase in college subsidies has virtually no effect on earnings mobility. Despite this result, the progressivity of the college subsidy affects earnings mobility largely because of the indirect incentive effects on investments in early education by poor parents.

American Economic Review, 2004

Recent empirical studies show that the intergenerational persistence of economic status in the U.... more Recent empirical studies show that the intergenerational persistence of economic status in the U.S. is much higher than previously thought. We develop a quantitative theory of inequality and intergenerational transmission of human capital where parents invest in early and college education of their children subject to borrowing constraints. Children differ exogenously in innate abilities, which can be correlated with their parent's innate ability. An important feature of the environment is that the quality of early education determines the probability of college completion. We calibrate a stationary equilibrium of this economy to relevant statistics in aggregate U.S. data, and use it to investigate the sources of inequality and persistence in earnings. In our benchmark model, about half of the intergenerational persistence and one fourth of the inequality in earnings are accounted for by endogenous investments in education. We find that early investments in education account for most of the endogenous persistence in earnings, while college education generates most of the endogenous inequality in earnings. Our theory is suited to study the effect of educational policies on the persistence of inequality. We show that public resources devoted to early education have the largest impact on earnings mobility. Moreover, non-progressive college subsidies generate more intergenerational persistence of earnings.

We build a two sector, dynamic general equilibrium model of a small open economy with traded an n... more We build a two sector, dynamic general equilibrium model of a small open economy with traded an non-traded goods, heterogeneous …rms and credit constraints. Firms face a working capital constraint in order to purchase intermediate goods, and face a borrowing limit for investment depending on their net worth. The model combines a …nancial accelerator mechanism with sectoral allocation of resources and balance sheet e¤ects. We calibrate the model using data from Mexico, from 1989 to 2000, and analyze the e¤ect of the 1994 crisis modeled as an unexpected sudden stop of foreign loans. The model predicts: (i) a current account reversal, (ii) a real exchange rate depreciation, (iii) a drop in output and TFP, and (iv) a large decline in investment. Moreover, the model predicts a deeper recession and a slower recovery for the non-traded sector. These real e¤ects are consistent with the evidence for the 1994 Mexican crisis.

Review of Economic Dynamics, 2011

Financial crises in emerging economies are accompanied by a large fall in total factor productivi... more Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of …nancial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working capital constraint to the purchase of intermediate goods.

Journal of Development Economics, 2004

We build a partial equilibrium model of firm dynamics under exchange rate uncertainty. Firms face... more We build a partial equilibrium model of firm dynamics under exchange rate uncertainty. Firms face idiosyncratic productivity shocks and observe the current level of the real exchange rate each period.

American Historical Review, 1970

We develop a model of optimal dynamic labor contracts in which firms provide training to workers,... more We develop a model of optimal dynamic labor contracts in which firms provide training to workers, but workers cannot credibly commit to stay with the firm. The training is in the form of skills which can profitably be used in other job matches. In the model, wage rates rise with seniority and separation rates are higher for low skilled workers than for high skilled workers. These observations are consistent with the evidence. We show that firing costs (i) increase the average duration of employer-worker matches, (ii) reduce the outside value of the worker, and (iii) increase the level of training provided by the firm. This mechanism has the opposite effect on measured productivity than the selection mechanism of search models with endogenous separation, where firing costs reduce the average quality of active matches. Our model provides a rationale for the positive relationship observed between the level of employment protection and TFP across European countries. † Preliminary and incomplete, comments welcome. Contact Information: currutia@itam.mx.

Recent empirical evidence for the U.S. indicates a high degree of intergenerational persistence i... more Recent empirical evidence for the U.S. indicates a high degree of intergenerational persistence in economic status. Assessing the effectiveness of various public policies in reducing persistence and equalizing opportunities in society requires measures of the contribution of major sources of persistence. In this paper we provide a quantitative model of intergenerational human capital transmission and earnings inequality that focuses on three sources of persistence: innate ability, early education, and college education. We find that about half of the intergenerational persistence and one fourth of the cross-sectional inequality in permanent earnings are accounted for by parental investments in education. Our model implies that early education accounts for most of the persistence generated by parental investments while college education accounts for most of the inequality. We show that these results have important implications for education policy. Our model indicates that a 20% increase in public resources devoted to early education has a 10% increase on earnings mobility while a similar increase in college subsidies has virtually no effect on earnings mobility. Despite this result, the progressivity of the college subsidy affects earnings mobility largely because of the indirect incentive effects on investments in early education by poor parents.

American Economic Review, 2004

Recent empirical studies show that the intergenerational persistence of economic status in the U.... more Recent empirical studies show that the intergenerational persistence of economic status in the U.S. is much higher than previously thought. We develop a quantitative theory of inequality and intergenerational transmission of human capital where parents invest in early and college education of their children subject to borrowing constraints. Children differ exogenously in innate abilities, which can be correlated with their parent's innate ability. An important feature of the environment is that the quality of early education determines the probability of college completion. We calibrate a stationary equilibrium of this economy to relevant statistics in aggregate U.S. data, and use it to investigate the sources of inequality and persistence in earnings. In our benchmark model, about half of the intergenerational persistence and one fourth of the inequality in earnings are accounted for by endogenous investments in education. We find that early investments in education account for most of the endogenous persistence in earnings, while college education generates most of the endogenous inequality in earnings. Our theory is suited to study the effect of educational policies on the persistence of inequality. We show that public resources devoted to early education have the largest impact on earnings mobility. Moreover, non-progressive college subsidies generate more intergenerational persistence of earnings.