Luigi Maria Briglia

Heterogeneous-agent macroeconomics reproduces the cross-sectional and life-cycle distribution of U.S. household wealth but misses much of how households move through it. In PSID data, I identify idiosyncratic expenditure risk: a persistent component of household non-durable consumption (medical bills, home and vehicle repairs, schooling and childcare) that current income, wealth, and demographics leave unpredicted and that does not anticipate higher future income. It accounts for 15% of the variance of log consumption, with a half-life near nine years. Within households' own histories, the recovered shocks predict the falls into and escapes from low wealth that income shocks leave largely unexplained. In a calibrated overlapping-generations model with discount-factor heterogeneity, expenditure risk enters as a persistent shock to the marginal utility of consumption, opening a covariance wedge with consumption growth in the household's Euler equation. Relative to an income-risk economy calibrated to the same wealth targets, expenditure risk closes 78% of the model-data gap on the variance of consumption growth, 85% on escapes from low net worth, and 39% on falls into it; the same wedge makes high marginal propensities to consume transient and loosens their tie to current wealth.

Large fiscal transfers shift households between regions with high and low marginal propensities to consume (MPCs), resulting in nonlinear aggregate responses. We develop a Nonlinear DEGM Update (NDU) method that shifts the wealth distribution nonlinearly over a short time window while solving the aggregate economy using a fast, first-order state-space approximation. A 10 percent transfer of annual GDP increases output by 4.5 percent in the nonlinear and NDU solutions, but by 12.0 percent in the linear solution. The empirical liquid-wealth distribution around zero disciplines this nonlinearity and exhibits a strong asymmetry. A stochastic debt-entry cost closely reproduces this empirical pattern.

How should governments design progressive labor-income taxes when workers can shift labor supply into untaxed informal work? Using household surveys for Brazil, Colombia, Mexico, and Peru, we document steep gradients in informality, employment, and unemployment across the income distribution. We analyze non-linear tax schedules in a heterogeneous-agent model with search frictions, savings, and an endogenous formal-informal labor-supply margin. Progressivity operates through an inclusion margin at the bottom - negative income taxes increase formal attachment - and an evasion margin at the top, where higher marginal tax rates shift labor supply into the untaxed sector. These opposing forces imply that both welfare and formality are hump-shaped in progressivity; in a calibration to Mexico, the welfare-maximizing degree of progressivity is about five times the current level.

We embed extreme-value preference shocks in an otherwise standard consumption-savings problem. Under log utility, the value function and consumption density admit closed forms: the consumption share follows a Beta distribution whose dispersion rises with wealth, matching a robust empirical pattern in PSID micro data. When households can ignore the episodic opportunities generated by these shocks, a selection mechanism emerges: poor households opt out and behave as in the standard model, while wealthy households exercise the opportunities and save more. This wealth-dependent amplification of precautionary saving concentrates the stationary wealth distribution in the right tail without heterogeneous discount factors, stochastic returns, or bequest motives. In a calibrated heterogeneous-agent economy, a single EV-dispersion parameter disciplined by the consumption-error profile accounts for 51-67% of the increase in top wealth shares through the selection channel alone.