I am an economist at the Congressional Budget Office. I completed my Ph.D. in economics at U.C. Berkeley. My research interests are in macroeconomics and public finance. I am particularly interested in the effects of monetary and tax policies on markets for capital goods, housing, and R&D.
You can contact me at caleb.wroblewski at gmail.com.
Research
Working Papers
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The Interest Rate Elasticity of Investment: Micro Estimates and Macro Implications
[+]AbstractI estimate the elasticity of investment to interest rates using cross-sectional variation and high-frequency monetary shocks. My estimates imply that a 1 p.p. decrease in interest rates increases capital demand by 4% eight quarters after the shock. This indicates a significant effect of interest rates on investment but is much smaller than prominent estimates of the interest rate elasticity derived from the investment response to tax policy changes. In a quantitative model with heterogeneous firms, I show that the impulse response I estimate provides a powerful tool to discriminate between models with different frictions. The evidence favors models with external financing constraints, while models with large real adjustment costs cannot match evidence from both interest rate and tax policy shocks. -
Sex and the City-Size Earnings Premium
[New!]
[+]AbstractWe document that women’s earnings are closer to parity with men’s in larger cities in the United States. This female-specific city-size earnings premium is nearly 50% larger than men’s city-size premium, is driven by non-college educated women, and cannot be explained by occupational sorting, commuting, or differences in labor supply. We develop a quantitative spatial model with local frictional marriage markets to explain why large gender-specific earnings differentials can coexist with balanced gender ratios in spatial equilibrium: the marriage market acts as an endogenous amenity, generating gender-specific congestion elasticities. Counterfactual analysis suggests eliminating the female city-size premium would increase the aggregate gender wage gap by 7%. -
From Pensions to Personnel: The Incentive Effects of Retirement Benefits on Retention
[Updated Version!]
[+]AbstractPrivate retirement plans are a crucial component of worker’s compensation in the U.S. and have long been thought to influence labor supply. This study uses a cohort-based regression discontinuity design to examine how a change in the retirement plan at the largest U.S. employer, the federal government, impacted the retention of employees over their full career. Workers with less valuable employer pensions but more portable retirement benefits were more likely to separate from the government between 15 and 30 years after beginning federal service. These effects are driven by highly productive workers, identified through supplemental compensation or early promotions, and workers with better outside options. These findings demonstrate that nonwage compensation impacts labor supply decisions across a worker’s lifecycle and the distribution of human capital over time, particularly in labor markets where employers compete through diverse compensation structures. -
Five Facts About (Rental) Prices: Landlord Heterogeneity and the Dynamics of Shelter Inflation
[Updated Version!]
[+]AbstractHousing is the largest component of the CPI, yet how landlords adjust contract rents remains poorly understood. Using 25 years of administrative data from Berkeley, California and a longitudinal survey representative of the U.S. rental housing market, we document five facts about rental price dynamics. First, rents show strong nominal rigidity at turnover, with roughly one-fifth of short-turnover leases unchanged and clear evidence of "missing mass" below $0 in the rent change distribution. However, this rigidity is state-dependent and disappears in recessions, when many landlords cut rents. Second, both the frequency and size of rent changes move with market conditions, unlike most non-housing CPI components. Third, rents display strong seasonality comparable to the home purchase market. Fourth, rents cluster at round numbers and just below them, reflecting coarse pricing, left-digit bias, and misoptimization by landlords. This clustering is strongly correlated with proxies for landlord sophistication and intensifies when rent growth deviates from typical trends or optimal reset prices are large, revealing a novel cognitive cost of inflation. Fifth, larger landlords adjust rents more aggressively in response to the business cycle, implying that the increasing presence of large, corporate landlords has increased the volatility of shelter inflation. Our estimates provide new moments for sticky-price models and highlight the role of behavioral frictions and firm heterogeneity in inflation dynamics. -
The Incidence and Efficiency of Land Value Taxation
[+]AbstractLand value taxes are often seen as particularly desirable because the fixed supply of land implies no efficiency loss from taxation, with the entire tax burden falling on current landowners. We study the incidence and efficiency of land taxes using a unique quasi-experiment that generated persistent variation in land tax rates across Danish municipalities. In contrast to the predictions of standard, neoclassical models, we estimate a precise zero effect of land taxes on residential home prices. The precision of our estimates allows us to confidently rule out full capitalization of taxes into home prices using leading estimates of housing discount rates. Our results imply that the burden of land taxes is shared with tenants and future purchasers. We also estimate null effects of land taxes on measures of housing development, mobility, and homeownership, though we do find that older homeowners sort away from high tax areas. Our results are consistent with limited efficiency costs of land value taxation but imply that land taxes are more regressive in our setting than predicted by standard models.
Publications
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Home Country Interest Rates and International Investment in U.S. Bonds
[+]AbstractWe analyze how interest rates affect cross-border portfolio investments. Data on U.S. bond holdings by foreign investors from 31 countries for the period 2003–2016 and a large variety in movements in interest rates in these countries provide for a unique way to analyze shifts in investment behavior in response to interest rates. We find that low(er) interest rates, now prevailing in many advanced countries, lead to greater investment in general into the United States, with the effects generally driven by investment in (higher yielding) corporate bonds, rather than in Treasury bonds. In addition to affecting overall investments, lower interest rates at home are associated with a greater weight on corporate bonds, consistent with search-for-yield. The results are economically important and robust to controlling for a number of country-specific macroeconomic and financial conditions as well as to sample restrictions and choices of interest rate. Our findings have important policy implications in that they suggest that low interest rates can lead to shifts in the volume and composition of overseas investments.
Resting Papers
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Searching for Yield Abroad: Risk-Taking Through Foreign Investment in U.S. Bonds
[+]AbstractThe much discussed risk-taking effects of low interest rates have been hard to document due to a paucity of data and challenges in identification. Analyzing unique, comprehensive, security-level data that capture 40 countries' entire investment in U.S. corporate bonds allows us to accurately characterize changes in riskiness and to help identify the causal mechanism. We show that declining home-country interest rates lead investors to tilt their portfolios toward riskier bonds in non-crises times. These changes occur entirely among investment-grade bonds. A 200 basis points decline leads investors to seek a 43 additional basis points yield pick-up, with effects that are even stronger when home interest rates reach very low levels. International spillovers of interest rates thus include risk taking that involves changes in the composition of bond portfolios.