Thomas Winberry

University of Chicago
Thomas Winberry
Assistant Professor of Economics

  Publications (including forthcoming)

When Inequality Matters for Macro and Macro Matters for Inequality
, with SeHyoun Ahn, Greg Kaplan, Ben Moll, and Christian Wolf (forthcoming in the NBER Macroeconomics Annual)
Matlab Toolbox available on github here
We develop an efficient and easy-to-use computational method for solving a wide class of general equilibrium heterogeneous agent models with aggregate shocks. Our method extends standard linearization techniques and is designed to work in cases when inequality matters for the dynamics of macroeconomic aggregates. We present two applications that analyze a two-asset incomplete markets model parameterized to match the distribution of income, wealth, and marginal propensities to consume. First, we show that our model is consistent with two key features of aggregate consumption dynamics that are difficult to match with representative agent models: (i) the sensitivity of aggregate consumption to predictable changes in aggregate income and (ii) the relative smoothness of aggregate consumption. Second, we extend the model to feature capital-skill complementarity and show how factor-specific productivity shocks shape dynamics of income and consumption inequality.

Working Papers

A Toolbox for Solving and Estimating Heterogeneous Agent Macro Models
(conditionally accepted, Quantitative Economics)
Dynare codes and user guide (heterogeneous firm codes coming soon)
I develop a computational method to solve and estimate heterogeneous agent macro models. The main challenge is that the state vector contains the distribution of microeconomic agents, which is typically infinite-dimensional. I approximate the distribution with a flexible parametric family, reducing the dimensionality to a finite set of parameters, and solve for the dynamics of these parameters by perturbation. I implement the method in Dynare and find that it is accurate and extremely efficient. As an illustration, I then use the method to estimate a heterogeneous firm model with neutral and investment-specific productivity shocks using Bayesian techniques. I find that the behavior of firms at the micro level matters quantitatively for inference about the aggregate shock processes, suggesting an important role for micro data in estimating macro models.

Lumpy Investment, Business Cycles, and Stimulus Policy (revise and resubmit, American Economic Review)
I study the implications of two key facts for aggregate investment dynamics: micro-level investment mainly occurs along the extensive margin and the real interest rate is mildly countercyclical. I build a dynamic general equilibrium model which captures these facts and find two key results. First, the elasticity of aggregate investment with respect to productivity shocks or policy stimulus is procyclical because in expansions more firms are likely to make an extensive margin investment. Second, targeting firms close to the extensive margin can substantially increase the cost effectiveness of stimulus policy.

Work In Progress

Financial Heterogeneity and the Investment Channel of Monetary Policy, with Pablo Ottonello (preliminary)
We study the role of heterogeneity in firms' financial positions in determining the investment channel of monetary policy. We show empirically that firms with low debt-to-asset ratios invest significantly more following an expansionary monetary policy shock than firms with high debt-to-asset ratios; in our sample, the 50% least leveraged firms account for nearly all of the total response to monetary policy. We then develop a heterogeneous firm New Keynesian model with financial frictions to interpret this fact and study its aggregate implications. In our model, low-leverage firms are likely to be financially unconstrained and respond to monetary policy through a strong intertemporal substitution channel; high-leverage constrained firms instead pay down their debt. The aggregate effect of monetary policy thus depends on the fraction of unconstrained firms, which varies over time according to the distribution of net worth.

How Does Firm Heterogeneity Matter for Aggregate Dynamics? Evidence from Factor Allocation, with Pablo Ottonello

Investment, Price Changes, and Monetary Policy: Models and Micro Data, with Joe Vavra

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