Gonzalo Paz-Pardo

I am a Senior Economist at DG Research in the European Central Bank. I hold an Economics PhD from University College London

I am interested in macroeconomics, household finance, and labor economics, with a particular focus on earnings dynamics, housing, and inequality.

My latest CV is available here.

ECB researcher profile


Working papers

Richer Earnings Dynamics, Consumption and Portfolio Choice over the Life-Cycle (joint with Julio Gálvez, February 2023)

Bank of Spain Working Paper Series    ECB Working Paper Series

Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that allowing for the rich features of earnings dynamics that are present in the data, in the context of a structurally estimated life- cycle portfolio choice model, helps to better understand the limited participation of households in the stock market, the age profile of participation, and their low holdings of risky assets. Households are subject to more background risk than previously considered; as a result, the estimated model under the flexible earnings process implies a substantially lower coefficient of risk aversion.

Homeownership and Portfolio Choice over the Generations (new version, November 2022) - forthcoming in AEJ:Macro


ECB Working Paper Series   

        VoxEU column   ECB Research Bulletin    SUERF Policy Brief

Earnings are riskier and more unequal for households born in the 1960s and 1980s than for those born in the 1940s. Despite improvements in financial conditions, younger generations are less likely to be living in their own homes than older generations at the same age. By using a life-cycle model with housing and portfolio choice that includes flexible earnings risk and aggregate asset price risk, I show that changes in earnings dynamics account for a large part of the reduction in homeownership across generations. Lower-income households find it harder to buy housing, and as a result accumulate less wealth.

Wage Risk and Government and Spousal Insurance (joint with Mariacristina De Nardi and Giulio Fella, new version, March 2023) - Revise&Resubmit at the Review of Economic Studies

VoxEU column  IFS Working Paper

The extent to which households can self-insure depends on their wage risk and family structure. We study the UK and show that the persistence and riskiness of wages depends on one’s age and position in the wage distribution. We calibrate a model of couples and singles with two alternative wage processes: a canonical one and a flexible one that better matches the data. We use our model to evaluate the optimal mix of two types of benefits—in-work versus income floor— under the two wage processes. Allowing for rich wage dynamics is important to properly evaluate benefit reforms: the canonical process underestimates wage persistence for women and implies that at the optimum, in-work benefits should account for most benefit income. The richer wage process, instead implies that the income floor should be the major source of benefits, similar to the system in place in the UK.

Published papers

Family and Government Insurance: Wage, Earnings, and Income Risks in the Netherlands and the U.S. (joint with Mariacristina De Nardi, Giulio Fella, Marike Knoef, and Raun van Ooijen),  Journal of Public Economics, volume 193, article no. 104327 (2021). 

Published version   VoxEU column

We document new facts about risk in male wages and earnings, household earnings, and pre- and post-tax income in the Netherlands and the United States. We find that, in both countries, earnings display important deviations from the typical assumptions of linearity and normality. Individual-level male wage and earnings risk is relatively high at the beginning and end of the working life, and for those in the lower and upper parts of the income distribution. Hours are the main driver of the negative skewness and, to a lesser extent, the high kurtosis of earnings changes. Even though we find no evidence of added-worker effects, the presence of spousal earnings reduces the variability of household income compared to that of male earnings. In the Netherlands, government transfers are a major source of insurance, substantially reducing the standard deviation, negative skewness, and kurtosis of income changes. In the U.S. the role of family insurance is much larger than in the Netherlands. Family and government insurance reduce, but do not eliminate nonlinearities in household disposable income by age and previous earnings in either country.

“Nonlinear household earnings dynamics, self-insurance, and welfare" (joint with Mariacristina De Nardi and Giulio Fella),  Journal of the European Economic Association, volume 18, issue 2, pages 890-926 (2020). 

 Published version   Earnings processes and Markov chains for use in structural models  Replication materials

An earlier, different version of the paper was circulated as “The Implications of Richer Earnings Dynamics for Consumption and Wealth", NBER working paper no. 21917 (2016).

Earnings dynamics are much richer than typically assumed in macro models with heterogeneous agents. This holds for individual-pre-tax and household-post-tax earnings and across administrative (Social Security Administration) and survey (Panel Study of Income Dynamics) data. We estimate two alternative processes for household after-tax earnings and study their implications using a standard life-cycle model. Both processes feature a persistent and a transitory component, but while the first one is the canonical linear process with stationary shocks, the second one has substantially richer earnings dynamics, allowing for age-dependence of moments, non-normality, and nonlinearity in previous earnings and age. Allowing for richer earnings dynamics implies a substantially better fit of the evolution of cross-sectional consumption inequality over the life cycle and of the individual-level degree of consumption insurance against persistent earnings shocks. The richer earnings process also implies lower welfare costs of earnings risk.

Work in progress

The aggregate and distributional implications of credit shocks on housing and rental markets (joint with Andrew Hannon and Juan Castellanos)

Women and men's labor income risk over the business cycle (joint with Mariacristina De Nardi, Giulio Fella, Marike Knoef, and Raun van Ooijen)

The life-cycle dynamics of wealth mobility (joint with Richard Audoly, Rory McGee and Sergio Ocampo Díaz)

Measuring labor income dynamics using expectations (joint with Manuel Arellano, Orazio Attanasio, Margherita Borella and Mariacristina De Nardi)

Distributional effects of inflation in the euro area (joint with Filippo Pallotti, Jirka Slacalek, Oreste Tristani and Gianluca Violante)

Discussion papers

Digitalisation and the economy (joint with Luca Dedola, Michael Ehrmann, Peter Hoffmann, Ana Lamo, Jirka Slacalek and Georg Strasser) - ECB Discussion Paper No. 2809

Digitalisation has fundamentally changed the global economy and will continue to do so. This paper draws on economic research to identify some of its key implications for labour markets, inequality, ecommerce and the financial system. Beyond its potential to boost productivity and living standards, digitalisation: i) does not necessarily replace jobs on aggregate but changes their content; ii) tends to raise income and wealth inequality; iii) has ambiguous effects on competition; and iv) might change how the retail and financial sectors respond to monetary policy. Developing adequate (re-)training opportunities and providing a labour market, regulatory, and innovation environment which encourages the creation of “good jobs” is essential to improve productivity and equity while avoiding a polarisation of labour markets. E-commerce and fintech will likely lead to a faster transmission of monetary policy. The rise of fintech brings about new risks for regulatory arbitrage and has ramifications for financial stability.


I'm a proud winner of an UCL Education Award for my teaching work.

I have taught Economics 1001 at University College London for three years, as part of the CORE Project. Here they interviewed me about my experience teaching the material to first year students and introducing it to new teachers. I have also collaborated with the translation to Spanish of the book as an academic reviewer.

I have also taught Advanced Macroeconomics in the UCL MSc Economics (2018-2019) and Microeconomics for Policy in the UCL MSc Economic Policy (2014-2015).

I have also run a panel data course in A Coruña University for four years.