Search Results
Journal Article
Have Labor Costs Slowed the Recovery?
Labor costs after 2009 grew more slowly than labor costs after 2001.
COVID-19 and the Importance of Testing
Using only the number of confirmed COVID-19 cases does not help us understand the scope of the pandemic.
Journal Article
Geographic Disparity in U.S. Output
A mere 81 of more than 3,000 counties produced half of total U.S. GDP in 2018.
Working Paper
Unemployment insurance fraud and optimal monitoring
The most prevalent incentive problem in the U.S. unemployment insurance system is that individuals collect unemployment benefits while being gainfully employed. We show how the unemployment insurance authority can efficiently use a combination of tax/subsidy and monitoring to prevent such fraud. The optimal policy monitors the unemployed at fixed intervals. Employment tax is nonmonotonic: it increases between verifications but decreases after a verification. Unemployment benefits are relatively flat between verifications but decrease sharply after a verification.
Working Paper
Minimum consumptions requirements: theoretical and quantitative implications for growth and distribution
The authors study the impact of a minimum consumption requirement on the rate of economic growth and the evolution of wealth distribution. The requirement introduces a positive dependence between the intertemporal elasticity of substitution and household wealth. This dependence implies a transition phase during which the growth rate of per-capita quantities rise toward their steady-state values and the distributions of wealth, consumption, and permanent income become more unequal. The authors calibrate the minimum consumption requirement to match estimates available for a sample of Indian ...
How the Big Mac Index Relates to Overall Consumer Inflation
Big Mac inflation appears to track CPI inflation, but its path can diverge from overall U.S. inflation because of price deviations relative to other items in the consumer basket.
Working Paper
The return to capital and the business cycle
Real business cycle models have difficulty replicating the volatility of S&P 500 returns. This fact should not be surprising since real business cycle theory suggests that the return to capital should be measured by the return to aggregate market capital, not stock market returns. We construct a quarterly time series of the after-tax return to business capital. Its volatility is considerably smaller than that of S&P 500 returns. Our benchmark model captures almost 40 percent of the volatility in the return to capital (relative to the volatility of output). We consider several departures from ...
Working Paper
Measuring Openness to Trade
In this paper we derive a new measure of openness?trade potential index?that quantifies the potential gains from trade as a simple function of data. Using a standard multicountry trade model, we measure openness by a country?s potential welfare gain from moving to a world with frictionless trade. In this model, a country?s trade potential depends on only the trade elasticity and two observable statistics: the country?s home trade share and its income level. Quantitatively, poor countries have greater potential gains from trade relative to rich countries, while their welfare costs of autarky ...
Journal Article
Price Equalization Does Not Imply Free Trade
In this article, the authors demonstrate the possibility of price equalization in a two-country world with barriers to international trade. For price equalization to occur when the countries are asymmetric, the country with higher productivity must also be the one with the lower trade barrier. A corollary of the authors? result is that small departures from purchasing power parity do not necessarily imply that world trade is mostly integrated.
Journal Article
Convergence to Rational Expectations in Learning Models: A Note of Caution
We show in a simple monetary model that the learning dynamics do not converge to the rational expectations monetary steady state. We then show it is necessary to restrict the learning rule to obtain convergence. We derive an upper bound on the gain parameter in the learning rule, based on economic fundamentals in the monetary model, such that gain parameters above the upper bound would imply that the learning dynamics would diverge from the rational expectations monetary steady state.