David Zarruk Valencia
Interests: Macroeconomics, Macro-Finance, Taxation, Inequality and Computational Macroeconomics

Personal website: www.davidzarruk.com

Job Market Paper

Wall Street or Main Street: Who to Bail Out?

Housing crises are characterized by an increase in foreclosure rates that generates losses to mortgage investors. To preserve their solvency, governments have historically implemented two policies: a) offer bailouts to investors (Wall Street), and b) offer subsidies to mortgage refinancing of households to prevent additional foreclosures (Main Street). This paper studies the welfare maximizing bailout-subsidy policy for the case of the Great Recession, shaped by two frictions: a dead-weight loss of 20% on the house value that occurs during the foreclosure process, and an information friction on individual house prices that leads households to engage in strategic default to qualify for the subsidy program. I quantitatively assess the welfare maximizing policy in a heterogeneous agents’ economy and find that a subsidy-only policy would have generated welfare gains of up to 0.4%, measured as consumption equivalent variation, as compared to the baseline calibration that matches TARP and HAMP programs. In contrast, a bailout-only policy would have generated a welfare loss of 0.8%.


A Practical Guide to Parallel Computing in Macroeconomics, with Jesús Fernández-Villaverde, 2017.

Parallel computing opens the door to solving and estimating much richer models in Economics. From dynamic optimization problems with high dimensionality to structural estimation with complex data, readily-available and economical parallel computing allows researchers to tackle problems in Economics that were beyond the realm of possibility just a decade ago. This paper describes the basics of parallel computing for economists, reviews widely-used implementation routines in Julia, Python, R, Matlab, C++ (OpenMP and MPI) and CUDA and compares performance gains using, as a test bed a standard life-cycle problem such as those in many models in macro, labor, and other fields.

The Effects of Student Loans on the Provision and Demand for Higher Education, with Rodrigo Azuero, 2016.

This paper characterizes the general equilibrium outcomes of the tertiary education market in a context where borrowing constraints bind, there is a two-tier college system operating under monopolistic competition in which colleges differ by quality offered and returns to education depend on school quality. The paper shows that a widening of the gap in quality supplied by tertiary education institutions can be a by-product of subsidized student loan policies and illustrates the main results through a numerical exercise applied to the case of Colombia, which underwent a rapid expansion in the supply of subsidized student loans during the past decade.

Teaching Experience

Math Camp for Economics and Wharton Finance Ph.D. (ECON 897) - Summer 2015, 2016

Teaching Assistant:
Macroeconomic Theory II for Economics Ph.D. (ECON 704) - Springs 2014, 2015
Monetary and Fiscal Policy (ECON 243) - Fall 2014


Jesús Fernández-Villaverde
University of Pennsylvania
3718 Locust Walk, 440 McNeil
Philadelphia, PA, 19104
+1 (215) 898-1504

Dirk Krueger
University of Pennsylvania
3718 Locust Walk, 511 McNeil
Philadelphia, PA, 19104
+1 (215) 573-1424

Guillermo Ordóñez
University of Pennsylvania
3718 Locust Walk, 428 McNeil
Philadelphia, PA, 19104
+1 (215) 898-1875