Search Results
Journal Article
Quality change in the CPI - commentary
Working Paper
The replacement problem in frictional economies : a near equivalence result
We examine how technological change affects wage inequality and unemployment in a calibrated model of matching frictions in the labor market. We distinguish between two polar cases studied in the literature: a "creative destruction" economy where new machines enter chiefly through new matches and an "upgrading" economy where machines in existing matches are replaced by new machines. Our main results are: (i) these two economies produce very similar quantitative outcomes, and (ii) the total amount of wage inequality generated by frictions is very small. We explain these findings in light ...
Working Paper
The political economy of labor subsidies
We explore a political economy model of labor subsidies, extending Meltzer and Richard's median voter model to a dynamic setting. We explore only one source of heterogeneity: initial wealth. As a consequence, given an operative wealth effect, poorer agents work harder, and if the agent with median wealth is poorer than average, a politico-economic equilibrium will feature a subsidy to labor. The dynamic model does not have capital, but it has perfect markets for borrowing and lending. Because tax rates influence interest rates, another channel for redistribution appears, since a decrease in ...
Discussion Paper
Macroeconomic implications of investment-specific technological change
A quantitative investigation of investment-specific technological change for the U.S. postwar period is undertaken, analyzing both long-term growth and business cycles within the same framework. The premise is that the introduction of new, more efficient capital goods is an important source of productivity change, and an attempt is made to disentangle its effects from the more traditional Hicks-neutral form of technological progress. The balanced growth path for the model is characterized and calibrated to U.S. National Income and Product Account data. The long- and short-run U.S. data are ...
Journal Article
News shocks and business cycles
This article considers the question, raised by Beaudry and Portier in their recent articles, of whether "news shocks" can lead to expansions and contractions that look like business cycle movements. News shocks are to be thought of solely as affecting expectations (regarding future events) and thus do not influence current resource restrictions at all. So the question is, for example, whether news about lower future productivity could lead our key aggregate variables?consumption, investment, and employment?to co-move down now. Beaudry and Portier make the point that standard neoclassical ...
Working Paper
Asset Trading and Valuation with Uncertain Exposure
This paper considers an asset market where investors have private information not only about asset payoffs, but also about their own exposure to an aggregate risk factor. In equilibrium, rational investors disagree about asset payoffs: Those with higher exposure to the risk factor are (endogenously) more optimistic about claims on the risk factor. Thus, information asymmetry limits risk sharing and trading volumes. Moreover, uncertainty about exposure amplifies the effect of aggregate exposure on asset prices, and can thereby help explain the excess volatility of prices and the predictability ...
Conference Paper
Vintage capital as an origin of inequalities
Does capital-embodied technological change play an important role in shaping labor market inequalities? This paper addresses the question in a model with vintage capital and search / matching frictions where costly capital investment leads to large heterogeneity in productivity among vacancies in equilibrium. The paper first demonstrates analytically how both technology growth and institutional variables affect equilibrium wage inequality, income shares and unemployment. Next, it applies the model to a quantitative evaluation of capital as an origin of wage inequality: at the current rate of ...
Working Paper
Vintage capital as an origin of inequalities
Journal Article
The IT revolution : is it evident in the productivity numbers?