Contact Information
Department of Economics
Northwestern University
2211 Campus Drive
Evanston, IL 60208
Phone: 224-522-7332
E-mail: msantana@u.northwestern.edu
Education
Ph.D., Economics, Northwestern University, 2025 (expected)
MA, Economics, Northwestern University, 2020
MSc, Economics, Católica-Lisbon School of Business and Economics, 2019
BA, Economics, Católica-Lisbon School of Business and Economics, 2017
Primary Fields of Specialization
Macroeconomics
Behavioral Economics
Job Market Paper
“A Theory of Downward Wage Rigidity”
Download Job Market Paper (PDF)
I develop a model where workers are averse to losses in the spirit of Kahneman and Tversky (1979), and need to search in order to find a job. In a frictional market in which both workers and firms have a say on the terms of labor contracts, nominal downward wage rigidity emerges endogenously as a result of the privately optimal division of gains from trade. The model implies that the response of wages to shocks is asymmetric. In response to a temporary negative productivity shock that is not too large, nominal wages are initially rigid and take some time to catch up. In response to a symmetric positive shock, firms increase nominal wages immediately but let real wages erode over time. Inflation “greases the wheels of the labor market”, in the sense that the inaction region is smaller in a high-inflation environment. The model rationalizes a number of additional empirical regularities: (1) wages of job-switchers are more flexible than wages of job-stayers, but not conditional on employment history, (2) the Phillips curve is nonlinear, and (3) the passthrough of shocks to wages decreases with firm productivity. Moreover, a calibration to US microdata yields a good fit to the distribution of nominal wage changes with parameters that are consistent with common estimates. The model prescribes an optimal positive inflation target, and a countercyclical response to shocks.
Other Research Papers
“Behavioral Sticky Prices” (With Sérgio Rebelo and Pedro Teles)
We study a model where households make decisions according to a dualprocess framework widely used in cognitive psychology. System 1 uses effortless heuristics but is susceptible to biases and errors. System 2 uses mental effort to make more accurate decisions. Through their pricing behavior, monopolistic producers can influence whether households deploy Systems 1 or 2. The strategic use of this influence creates a new source of price inertia and provides a natural explanation for the ”rockets and feathers” phenomenon: prices rise quickly when costs increase but fall slowly when costs fall. Our model implies that price stability is not optimal.
References
Prof. Sérgio Rebelo (Committee Co-Chair)
Prof. Martin Eichenbaum (Committee Co-Chair)
Prof. George-Marios Angeletos