Search Results
Report
Fiat Value in the Theory of Value
We explore monetary policy in a world without currency. In our world, money is a form of government debt that bears interest, which can be negative as well as positive. Services of money are a factor of production. We show that the national accounts must be revised in this world. Using our baseline economy, we determine the balanced growth paths for a set of money interest rate target policy regimes. Besides this interest rate, the only policy variable that differs across regimes is either the labor income tax rate or the inflation rate. We find that Friedman monetary satiation without ...
Journal Article
Changes in the wealth of nations
This study systematically examines the distribution of the wealth of nations and how it has evolved over time. A nation's wealth is measured by its real per-capita gross domestic product. The study documents the following key economic development facts that a theory of economic development must be consistent with: There is a great disparity in wealth between the richest and poorest countries. This disparity has changed little in the postwar period. There was an upward shift in the distribution of the wealth of nations. There has been considerable relative wealth mobility, with some ...
Journal Article
Aggregate labor supply
Macroeconomics has made tremendous advances following the introduction of labor supply into the field. Today, it is widely acknowledged that labor supply matters for many key economic issues, particularly for business cycles and tax policy analysis. However, the extent to which labor supply matters for such questions depends on the aggregate labor supply elasticity?that is, the sensitivity of the time allocation between market and nonmarket activities. For several decades, the magnitude of the aggregate labor supply elasticity has been the subject of much debate. In this article, we review ...
Journal Article
Is the stock market overvalued?
The value of U.S. corporate equity in the first half of 2000 was close to 1.8 times U.S. gross national product (GNP). Some stock market analysts have argued that the market is overvalued at this level. We use a growth model with an explicit corporate sector and find that the market is correctly valued. In theory, the market value of equity plus debt liabilities should equal the value of productive assets plus debt assets. Since the net value of debt is currently low, the market value of equity should be approximately equal to the market value of productive assets. We find that the market ...
Report
Openness, technology capital, and development
In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. What distinguishes technology capital from other forms of capital is the fact that a firm can use it simultaneously in multiple domestic and foreign locations. Foreign technology capital is exploited by permitting foreign direct investment by multinationals. In both steady-state and transitional analyses, the ...
Report
Patent data appendix for quid pro quo: Technology capital transfers for market access in China
Despite the recent rapid development and greater openness of China?s economy, FDI flows between China and technologically advanced countries are relatively small in both directions. We assess global capital flows in light of China?s quid pro quo policy of exchanging market access for transfers of technology capital?accumulated know-how such as research and development (R&D) that can be used in multiple production locations. We first provide empirical evidence of this policy and then incorporate it into a multicountry dynamic general equilibrium model. This extension leads to a significantly ...
Working Paper
The labor productivity puzzle
Prior to the mid-1980s, labor productivity growth was a useful barometer of the U.S. economy?s performance: it was low during economic recessions and high during expansions. Since then, labor productivity has become significantly less procyclical. In the recent recession of 2008?2009, labor productivity actually rose as GDP plummeted. These facts have motivated the development of new business cycle theories because the conventional view is that they are inconsistent with existing business cycle theory. In this paper, we analyze recent events with existing theory and find that the labor ...
Report
Quid pro quo: Technology capital transfers for market access in China
Despite the recent rapid development and greater openness of China?s economy, FDI flows between China and technologically advanced countries are relatively small in both directions. We assess global capital flows in light of China?s quid pro quo policy of exchanging market access for transfers of technology capital?accumulated know-how such as research and development (R&D) that can be used in multiple production locations. We first provide empirical evidence of this policy and then incorporate it into a multicountry dynamic general equilibrium model. This extension leads to a significantly ...