I am a Ph.D. Candidate in Economics at the University of Minnesota, and I'll be on the 2024-2025 Economics Job Market.
My research interests are in the intersection of Macroeconomics, Labor and Development Economics.
Contact Information:
Email: diazd007@umn.edu
Address: 1925 South 4th Street, 4-101 Hanson Hall, Minneapolis, MN 55455
Working Papers
Abstract: What are the effects of the minimum wage on efficiency in labor markets with a large informal sector? I develop a labor monopsonistic competition framework where firms endogenously sort into the formal or informal sector to potentially circumvent government policy. An increase in the minimum wage level incentivizes firms to become informal, thou the aggregate shift to informality could take time as existing formal firms cannot disappear from the view of the government. I calibrate the model to match moments of the wage and firm size distribution of both the formal and the informal sector in Mexico. I find that in the short run, moderate increases in the minimum wage can offset labor market power and increase both the formality rate and efficiency. In the long-run as firm composition shifts to the informal sector, these positive effects disappear, and it is efficiency-maximizing to set the minimum wage at a non-binding level.
Work in Progress
Abstract: How do the income of self-employed workers evolve throughout the path of development? Using state level panel data from labor force survey in Mexico, I show that as GDP per worker increases i) the share of self-employment decreases, ii) the hourly income growth of the self-employed outpace that of wage employees, and iii) there is a strong reduction in the variance of self-employment income attributable to a decrease in the left tail of the distribution. To explain these phenomena, I develop an occupational choice model where low and high skill self-employment coexist. As workers accumulate human capital, low-skill self-employees disproportionately select themselves into wage employment, increasing the average wage and decreasing the wage dispersion of the remaining self-employed. Calibrating the model, I find that these changes in the occupational composition contributes 17% of the difference in productivity between the states with the lowest and highest quartile of income.
Older Work
Abstract: This paper analyzes the channels through which foreign monetary policy rates and the risk premium have spillovers on domestic monetary policy interest rates. To analyze this, I construct a small-open-economy New Keynesian model where imports are used as a factor of production. In the model, an increase in the foreign monetary policy rates or the risk premium leads to a deterioration in the terms of trade through the risk-adjusted uncovered interest rate parity (RUIP) equation. This, in turn, has an impact on marginal costs, inflation, and the monetary policy rate. Results show that, independently of the shock that led the foreign economy to increase monetary policy rates, changes in the foreign real interest rate always have positive spillovers on local interest rates. Furthermore, spillovers are bigger when the local economy is more open, the elasticity of substitution between foreign and domestic goods is greater, or when real wages are more rigid. I show that when the monetary policy rate reacts directly to foreign interest rates and the risk premium, it can replicate the flexible price equilibrium and considerably reduce the pass-through from the exchange rate to inflation.