Research

In the theory of heterogeneous returns to wealth of Menzio and Spinella (2025), monetary policy affects equilibrium outcomes even when real money balances are negligible and nominal rigidities are absent. Holding money is the households' investment option outside the financial market. Monetary policy affects the rate of return on holding money, the value of the households' option outside the financial market and, in turn, the rates of return inside the financial market. This is true even when the fraction of households that do exercise the outside option is negligible and, hence, even when real money balances are arbitrarily small. Quantitatively, monetary policy has a large impact on economic outcomes even in the cashless limit. These findings echo Lagos and Zhang (2022). They imply that one cannot use the observation that money balances are low (and may become even lower) as a justification to use models that abstract from the role of money as a store of value to assess monetary policy.

Recent empirical evidence documents that different individuals earn systematically different rates of return, even after controlling for portfolio composition. We propose a general equilibrium theory of residual heterogeneity in rates of return on wealth by embedding a financial market with search frictions into a monetary incomplete-market model. We show that the distribution of rates of return offered in the financial market is endogenous and depends on the marginal product of capital, the return on fiat money, and the joint distribution of households across wealth and financial human capital. When calibrated, the model succeeds in reproducing the extent of residual dispersion in returns to wealth across individuals. We use the calibrated model to study various policies and counterfactuals, with a particular focus on monetary policy.

We develop a search model based on Burdett and Mortensen (1998) to investigate the effects of search and financial frictions on the dispersion of the marginal productivity of capital (MPK), particularly in developing countries. We analyze scenarios with isolated and combined frictions to assess their impact on MPK distribution. Our findings highlight that the interaction between these frictions leads to significant MPK dispersion, offering a potential explanation for the persistent misallocation of capital observed in less developed markets. Our model introduces a deviation from the traditional Burdett-Mortensen framework through a ‘Gatekeeping Channel’, where existing capital suppliers strategically set prices to deter other firms from modernizing. Moreover, we demonstrate that reducing entry barriers and improving financial infrastructure can greatly mitigate capital misallocation.

Leveraging the geographic dimension of a large administrative panel on employer employee-contracts, we study the impact of robot adoption on wage inequality through changes in worker-firm assortativity. Using recently developed methods to correctly and robustly estimate worker and firm unobserved characteristics, we find that robot adoption increases wage inequality by fostering both horizontal and vertical task specialization across firms. In local economies where robot penetration has been more pronounced, workers performing similar tasks have disproportionately clustered in the same firms (‘segregation’). Moreover, such clustering has been characterized by the concentration of higher earners performing more complex tasks in firms paying higher wages (‘sorting’). These firms are more productive and poach more aggressively. We rationalize these findings through a simple extension of a well-established class of models with two-sided heterogeneity, on-the-job search, rent sharing and employee poaching. We conclude that our empirical findings reveal the presence of both ‘routine-biased technological change’ (RBTC), whereby new technology decreases the relative demand for workers in traditional routine tasks, and ‘core-biased technological change’ (CBTC), whereby new technology requires workers with specialized knowledge independently of their tasks being more or less routine intensive.