Essays On Inequality Interest Rates And Macroeconomic Policies

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Essays on Inequality, Interest Rates and Macroeconomic Policies

Author : Ludwig Wilhelm Straub
Publisher :
ISBN 13 :
Total Pages : 284 pages
Book Rating : 4.:/5 (15 download)

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Book Synopsis Essays on Inequality, Interest Rates and Macroeconomic Policies by : Ludwig Wilhelm Straub

Download or read book Essays on Inequality, Interest Rates and Macroeconomic Policies written by Ludwig Wilhelm Straub and published by . This book was released on 2018 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three chapters on inequality, interest rates and macroeconomic policies. The first chapter explores the macroeconomic consequences of the recent rise in permanent income inequality. First, I show that in many common macroeconomic models consumption is a linear function of permanent (labor) income. This implies that macroeconomic aggregates are neutral with respect to shifts in the distribution of permanent income. Motivated by this neutrality result, I develop novel approaches to test for linearity in U.S. household panel data. The estimates suggest an elasticity of 0.7, soundly rejecting linearity. I quantify the effects of this deviation from neutrality using a novel non-homothetic precautionary-savings model. In the model, the rise in U.S. permanent labor income inequality since the 1970s caused: (a) a decline in real interest rates of around 1%; (b) an increase in the wealth-to-GDP ratio of around 30%; (c) wealth inequality to rise almost as rapidly as it did in the data. The second chapter, joint with Sebastián Fanelli, develops a theory of foreign exchange interventions in a small open economy with limited capital mobility between home and foreign bond markets. Due to limited capital mobility, the central bank can implement nonzero bond spreads by managing its portfolio. Crucially, spreads are inherently costly as they allow foreign intermediaries to make carry-trade profits. Optimal interventions balance these costs with terms of trade benefits. We show that they lean against the wind of global capital flows to avoid excessive currency appreciation. Due to the convexity of the costs, interventions should be small and spread out, relying on credible promises (forward guidance) of future interventions. By contrast, excessive smoothing of the exchange rate path may create large spreads, inviting costly speculation. Finally, in a multi-country extension of our model, we find that the decentralized equilibrium features too much reserve accumulation and too low world interest rates, highlighting the importance of policy coordination. The third chapter, joint with Iván Werning, reconsiders the well-known Chamley-Judd result, according to which capital should not be taxed in the long run. For the main model in Judd (1985), we prove that the long run tax on capital is positive and significant, whenever the intertemporal elasticity of substitution is below one. The main model in Chamley (1986) imposes an upper bound on capital taxes. We provide conditions under which these constraints bind forever, implying positive long run taxes. When this is not the case, the long-run tax may be zero. However, if preferences are recursive and discounting is locally non-constant (e.g., not additively separable over time), a zero long-run capital tax limit must be accompanied by zero private wealth (zero tax base) or by zero labor taxes (first best). Finally, we explain why the equivalence of a positive capital tax with ever increasing consumption taxes does not provide a firm rationale against capital taxation.

Essays on Macroeconomic Policies and Household Heterogeneity

Author : Gergő Motyovszki
Publisher :
ISBN 13 :
Total Pages : 156 pages
Book Rating : 4.:/5 (127 download)

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Download or read book Essays on Macroeconomic Policies and Household Heterogeneity written by Gergő Motyovszki and published by . This book was released on 2021 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is composed of three independent chapters, but all centered around the broader topic of how macroeconomic policies interact with various aspects of household heterogeneity. Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high and less-skilled workers. In particular, this effect is prominent in sectors intensive in less-skilled labor, that exhibit high degree of capital-skill complementarity (CSC) and are subject to matching inefficiencies. To rationalize these findings we build a New Keynesian DSGE model with asymmetric search and matching (SAM) frictions across the two types of workers and CSC in the production function. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel. Monetary-Fiscal Interactions and Redistribution in Small Open Economies Ballooning public debts in the wake of the covid-19 pandemic can present monetary-fiscal policies with a dilemma if and when neutral real interest rates rise, which might arrive sooner in emerging markets: policymakers can stabilize debts either by relying on fiscal adjustments (AM-PF) or by tolerating higher inflation (PM-AF). The choice between these policy mixes affects the efficacy of the fiscal expansion already today and can interact with the distributive properties of the stimulus across heterogeneous households. To study this, I build a two agent New Keynesian (TANK) small open economy model with monetary-fiscal interactions. Targeting fiscal transfers more towards high-MPC agents increases the output multiplier of a fiscal stimulus, while raising the degree of deficitfinancing for these transfers also helps. However, precise targeting is much more important under the AM-PF regime than the question of financing, while the opposite is the case with a PM-AF policy mix: then deficit-spending is crucial for the size of the multiplier, and targeting matters less. Under the PM-AF regime fiscal stimulus entails a real exchange rate depreciation which might offset "import leakage" by stimulating net exports, if the share of hand-to-mouth households is low and trade is price elastic enough. Therefore, a PM-AF policy mix might break the Mundell-Fleming prediction that open economies have smaller fiscal multipliers relative to closed economies. Weak Wage Recovery and Precautionary Motives after a Credit Crunch During the economic recovery following the financial crisis many advanced economies saw subdued wage dynamics, in spite of falling unemployment and an increasingly tight labour market. We propose a mechanism which can account for this puzzle and work against usual aggregate demand channels. In a heterogeneous agent model with incomplete markets we endogenize uninsurable idiosyncratic risk through search-and-matching (SAM) frictions in the labour market. In this setting, apart from the usual precautionary saving behaviour, households can self-insure also by settling for lower wages in order to secure a job and thereby avoid becoming borrowing constrained. This channel is especially pronounced for asset-poor agents, already close to the constraint. We introduce a credit crunch into this framework modelled as a gradual tightening of the borrowing constraint (and utilizing a continuous time approach, known as HACT). The perfect foresight transition dynamics feature falling wages despite a tightening labour market and expanding employment. As households suddenly find themselves closer to the borrowing constraint, the increased precautionary motive drives them to accept lower wages in the bargaining process, while firms respond to this by posting more vacancies, leading to a tighter labour market and falling unemployment. If the household deleveraging pressure is persistent enough after the credit crunch, it can explain the weak wage recovery in spite of already stronger aggregate demand.

Markets, Unemployment, and Economic Policy

Author : Philip Arestis
Publisher : Psychology Press
ISBN 13 : 9780415133906
Total Pages : 604 pages
Book Rating : 4.1/5 (339 download)

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Book Synopsis Markets, Unemployment, and Economic Policy by : Philip Arestis

Download or read book Markets, Unemployment, and Economic Policy written by Philip Arestis and published by Psychology Press. This book was released on 1997 with total page 604 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this volume more than 40 leading economists critically evaluate the work of Geoff Harcourt. Contributors include Tony Atkinson, Tony Lawson, Edward Nell and Ian Steedman.

Essay on Inequality, Business Cycles, and Macroeconomic Policy

Author : Eunseong Ma
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (14 download)

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Book Synopsis Essay on Inequality, Business Cycles, and Macroeconomic Policy by : Eunseong Ma

Download or read book Essay on Inequality, Business Cycles, and Macroeconomic Policy written by Eunseong Ma and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Three Essays on Macroeconomics and Wealth Distribution

Author : Xiaowen Lei
Publisher :
ISBN 13 :
Total Pages : 111 pages
Book Rating : 4.:/5 (112 download)

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Book Synopsis Three Essays on Macroeconomics and Wealth Distribution by : Xiaowen Lei

Download or read book Three Essays on Macroeconomics and Wealth Distribution written by Xiaowen Lei and published by . This book was released on 2018 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: My thesis focuses on macroeconomics and monetary policy, with a concentration on belief heterogeneity, household portfolio choice and wealth distribution. I also work on real option models in monetary policy. The first chapter of my thesis, entitled "Wait and See" Monetary Policy , was coauthored with my classmate Michael Tseng, and is recently published in Macroeconomic Dynamics. The paper develops a model of the optimal timing of interest rate changes. With fixed adjustment costs and ongoing uncertainty, changing the interest rate involves the exercise of an option. Optimal policy therefore has a "wait-and-see" component, which can be quantified using option pricing techniques. We show that increased uncertainty makes the central bank more reluctant to change its target interest rate, and argue that this helps explain recent observed deviations from the Taylor Rule. The second chapter is entitled Risk, Uncertainty and the Dynamics of Inequality, which is co-authored with my senior supervisor Professor Kenneth Kasa, and is recently published in Journal of Monetary Economics. That paper studies the dynamics of wealth inequality in a continuous-time Blanchard/Yaari model. Its key innovation is to assume that idiosyncratic investment returns are subject to (Knightian) uncertainty. In response, agents formulate 'robust' portfolio policies (Hansen and Sargent (2008)). These policies are non-homothetic; wealthy agents invest a higher fraction of their wealth in uncertain assets featuring higher mean returns. This produces an endogenous feedback mechanism that amplifies inequality. It also produces an accelerated rate of convergence, which resolves a puzzle recently identified by Gabaix, Lasry, Lions, and Moll (2016). The third chapter, entitled Information and Inequality, studies wealth inequality in a continuous-time Blanchard/Yaari model with idiosyncratic investment returns. Its key innovation is to assume that individuals can buy information. Information reduces uncertainty about the unknown mean investment return. If the coefficient of relative risk aversion exceeds unity, reduced estimation risk encourages investment in higher yielding risky assets. As a result, endogenous information acquisition amplifies wealth inequality. Relatively wealthy individuals buy more information, which leads them to invest more in higher yielding assets, which then makes them even wealthier.

Essays on the Determinants of Income and Wealth Inequality in the United States

Author : Shin Chang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (11 download)

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Book Synopsis Essays on the Determinants of Income and Wealth Inequality in the United States by : Shin Chang

Download or read book Essays on the Determinants of Income and Wealth Inequality in the United States written by Shin Chang and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the relevant factors that drive income and wealth inequality in the United States with the aim of facilitating a better understanding of the dynamic relationships between inequality and key macroeconomic variables. This can serve as a prerequisite to the ability of policymakers to restrain the negative externalities associated with increasing inequality and implement measures to reduce the unexpected effects. The thesis consists of five independent papers corresponding to five chapters. As economic growth is a primary goal of every country and widely accepted tool for reducing economic inequality, our study starts with economic growth. The first paper examines the relationship between the U.S. per capita real GDP and income inequality over the period 1917 to 2012. The literature uncovers a complex set of interactions, which depends on the specific research method and sample, between inequality and economic growth and highlights the difficulty of capturing a definitive causal relationship. Inequality either promotes, retards, or does not affect growth. Most existing studies that examine the inequality-growth nexus exclusively utilize time-domain methods. We use wavelet analysis which allows the simultaneous examination of correlation and causality between the two series in both the time and frequency domains. We find robust evidence of positive correlation between the growth and inequality across frequencies. Yet, directions of causality vary across frequencies and evolve with time. In the time-domain, the time-varying nature of long-run causalities implies structural changes in the two series. These findings provide a more thorough picture of the relationship between the U.S. per capita real GDP and inequality measures over time and frequency, suggesting important implications for policy makers. Inflation targeting is a monetary policy where the central bank sets a specific inflation rate as its goal. The federal government spurs economic growth by adding liquidity, credit, and jobs to the economy and inflation stimulate the demand needed to drive economic growth. The second paper investigates the effects of the inflation rate on income inequality to see whether monetary policy and the resulting inflation rate can affect income inequality and improve the well-being of individuals. Our analysis relies on a cross-state panel for the United States over the 1976 to 2007 period to assess the relationship between income inequality and the inflation rate, employing a semiparametric instrument variable (IV) estimator. By using cross-state panel data, we minimize the problems associated with data comparability often encountered in cross-country studies related to income inequality. We find that the relationship depends on the level of the inflation rate. A positive relationship occurs only if the states exceed a threshold level of the inflation rate. Below this value, inflation rate lowers income inequality. The results suggest that a nonlinear relationship exists between income inequality and the inflation rate. The researchers also examine the relationship between income inequality and growth in personal income, since personal income exerts a large effect on consumer consumption, and since consumer spending drives much of the economy. The third paper investigates the causal relationship between personal income and income inequality in a panel data of 48 states for the period of 1929-2012. Although inequality rose almost everywhere between 1980 to present, some states and regions experienced substantially greater increases in inequality than did others. The decentralization allows different state level of policies, however, there is also a cross-state consistency in how those policies respond to the main economic shocks. Since U.S. states are subject to significant spatial effects given their high level of integration, ignoring cross-sectional dependency may lead to substantial bias and size distortions. We employ a causality methodology proposed by Emirmahmutoglu and Kose (2011), as it takes into account possible slope heterogeneity and cross-sectional dependency in a multivariate panel. Evidence of bi-directional causal relationship exists for several inequality measures -- the Atkinson Index, Gini Coefficient, the Relative Mean Deviation, TheiliÌ8℗¿℗ưs entropy Index and Top 10% -- but no evidence of the causal relationship for the Top 1 % measure. Also, this paper finds state-specific causal relationships between personal income and inequality. The level of development of the United States is related to the sophistication of the financial structure which influences the ability to hedge against shocks and to loosen spending constraints. It leads us to investigate if the financial development affects income inequality in the U.S. In the fourth paper, we look into the role of financial development on U.S. state-level income inequality in a panel data of 50 states from 1976 to 2011. To our knowledge, this paper is the first regarding examining the role of financial development on U.S. state-level inequality. We analyze the data using Fixed Effect and Dynamic Fixed Effect regression. We also divide 50 states into two groups-states, with higher inequality measure and states with lower inequality measures than average of the cross-state average of the inequality, to examine the possible nonlinear impact of financial development on income inequality. We find robust results whereby financial development linearly increases income inequality for the 50 states. When we divide 50 states into two separate groups of higher and lower inequality states than the cross-state average inequality, the effect of financial development on income inequality appears non-linear. When financial development improves, the effect increases at an increasing rate for high income inequality states, whereas an inverted U-shaped relationship exists for low-income inequality states.

Essays on the Macroeconomic Effects of Inequality

Author : Guzmán González-Torres Fernández
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (91 download)

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Book Synopsis Essays on the Macroeconomic Effects of Inequality by : Guzmán González-Torres Fernández

Download or read book Essays on the Macroeconomic Effects of Inequality written by Guzmán González-Torres Fernández and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores the aggregate allocational effects of different forms of economic inequality. Its three chapters study how an uneven distribution of production factors and financial resources, coupled with different forms of bureaucratic hurdles to the development of business ideas, financial constraints, or credit shocks, can affect the distribution and productivity of firms, the composition of the demand for goods and services, or the creation of valuable worker-firm matches in an economy. Even though it becomes clear throughout the dissertation that eliminating as many frictions in the firm-creation process, putting in place different redistribution policies, and alleviating financial frictions in an economy all have great effects on the aggregate economy that were not completely understood in previous theories, the welfare effects of such policies remain a subject for study in future work.

Inequality and Macroeconomic Policy

Author : Laurence Malafry
Publisher :
ISBN 13 : 9789177975243
Total Pages : pages
Book Rating : 4.9/5 (752 download)

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Book Synopsis Inequality and Macroeconomic Policy by : Laurence Malafry

Download or read book Inequality and Macroeconomic Policy written by Laurence Malafry and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Causes and Consequences of Income Inequality

Author : Ms.Era Dabla-Norris
Publisher : International Monetary Fund
ISBN 13 : 1513547437
Total Pages : 39 pages
Book Rating : 4.5/5 (135 download)

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Book Synopsis Causes and Consequences of Income Inequality by : Ms.Era Dabla-Norris

Download or read book Causes and Consequences of Income Inequality written by Ms.Era Dabla-Norris and published by International Monetary Fund. This book was released on 2015-06-15 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.

Full Employment and Growth

Author : James Tobin
Publisher : Edward Elgar Publishing
ISBN 13 :
Total Pages : 336 pages
Book Rating : 4.:/5 (321 download)

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Book Synopsis Full Employment and Growth by : James Tobin

Download or read book Full Employment and Growth written by James Tobin and published by Edward Elgar Publishing. This book was released on 1996 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: A collection of twenty-six essays written by Yale economics professor Tobin, "the Keynesian who won't quit" (and proud of it). These essays defend Keynesian policies against extremes of classical economics, as well as respond to recent economic developments in the areas of "globalization," the transition to capitalism in former communist economies, and the rise in poverty and inequality in the US. The volume is divided five parts dealing with macroeconomic, monetary, fiscal, international economic relations, and social policies. Annotation copyright by Book News, Inc., Portland, OR

Essays on Policy Dynamics Under Political Frictions

Author : Yanlei Ma
Publisher :
ISBN 13 :
Total Pages : 186 pages
Book Rating : 4.:/5 (932 download)

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Book Synopsis Essays on Policy Dynamics Under Political Frictions by : Yanlei Ma

Download or read book Essays on Policy Dynamics Under Political Frictions written by Yanlei Ma and published by . This book was released on 2015 with total page 186 pages. Available in PDF, EPUB and Kindle. Book excerpt: The successful design and implementation of macroeconomic and public policies has an important political dimension. This dissertation, which lies at the intersection of macroeconomics and political economy, focuses on understanding the dynamic fiscal and regulatory policies in the context of political conflicts and special interests. The first essay, Curse or Blessing? On the Welfare Consequences of Divided Government and Policy Gridlock, studies the welfare consequences of divided government by analyzing a dynamic legislative bargaining model with endogenous status quo. By comparing a unified government where the opponent's approval is not needed with a divided government where unanimity rule applies, I show that with divided government tax policy is less responsive due to gridlock and is distorted due to dynamic strategic considerations. However, the welfare consequences of such a policy are mixed because gridlock also reduces policy fluctuations created by political turnover. In the simulated economy, I find that divided government can Pareto dominate unified government. While this phenomenon prevails at various levels of inequality and political polarization, the set of initial status quo tax rates allowing for it shrinks as inequality and political polarization rises. Moreover, as income inequality rises, on average divided government benefits the poor while hurting the rich. This is because households at different income levels trade off potential gains and losses from policy gridlock differently. The second essay, Political-Driven Financial Regulatory Cycle, develops a positive theory of political-driven financial regulatory cycle. The key feature of the model is that the regulatory policy is determined through the interaction of financial sector special interest group, politicians competing for office, and households with time-varying attention on financial regulation. I find that in absence of the special interest group, politicians maximize the utility of households and implement stringent regulation. Once the special interest group is introduced, the politicians are induced to behave as if they were maximizing the weighted sum of utilities of the financial industry and strategic households. In symmetric equilibrium, politicians' policies converge and they choose the regulation such that the electoral loss due to weakened support from households equals the electoral gain created by campaign contribution. Moreover, the equilibrium financial regulation turns out to be pro-cyclical. During financial market expansions, the financial regulation remains largely ignored by the general public. Hence the policymaker cater to the financial interest group and promote loose regulation. Once financial crisis takes place, the public attention on regulation is brought up. For fear of upsetting the voters, the politician is forced to tighten the regulation. The third essay, Evaluating Durable Public Good Provision using Housing Prices, is collaborated work with professor Stephen Coate. Recent empirical work in public finance uses the housing price response to public investments to assess the efficiency of local durable public good provision. This paper investigates the theoretical foundations for this technique. In the context of a novel theoretical model developed to study the issue, it shows that there is limited justification for the technique when a budget-maximizing bureaucrat interacts with rational, forward-looking citizens. A special case in which the bureaucrat faces no vot- ing uncertainty is solved in closed form to show why the technique can falsely predict under-provision. In the generalized model which involves randomness of voting outcomes, we show numerically that the technique may falsely predict both under-provision and over-provision of local durable public good. The technique is valid, however, when citizens have adaptive expectations, believing that whatever provision level that currently prevails will be maintained indefinitely.

Essays on Macro-development and Inequality

Author : Alessandra Peter
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (11 download)

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Download or read book Essays on Macro-development and Inequality written by Alessandra Peter and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation explores various topics in macroeconomics related to the level of aggregate income in different countries and how (un-)equally it is distributed across people within a country. More specifically, I focus on firms: who owns them, how they are financed, and how their production processes connect them to other sectors of the economy. In the first chapter, I study how financial markets affect the distribution of wealth across households through their effect on ownership structures of firms. I show that, within Europe, there are countries in which firms are broadly owned and financed by large parts of the population. In these countries, business risk is more widely spread across people, and wealth is less concentrated in the hands of just a few households. The remaining two chapters are concerned with the specific challenges facing firms in developing countries. I study the interaction of different sectors of the economy and what the nature of interlinkages implies for the size of firms and aggregate productivity. These are first-order issues when thinking about policies to close the gap in output and productivity between developing and developed countries. In the first chapter, `Owning Up: Closely Held Firms and Wealth Inequality', I study how frictions in debt and equity markets affect wealth inequality in Eurozone countries. Using micro data on households and firms, I document that in more unequal countries, there are more privately held firms, and ownership of publicly traded firms is more concentrated. I develop a dynamic general equilibrium model in which entrepreneurs have the option to run a private firm and issue debt, or go public and also issue outside equity. Both forms of external finance are subject to country-specific frictions. With more access to debt, entrepreneurs can run larger firms and are wealthier. Similar to debt, outside equity allows entrepreneurs to increase investment in their firm, but it also reduces their risk exposure, which lowers savings and wealth holdings. When parameters are chosen to match the facts I document on firm ownership and financing, the model successfully predicts differences in wealth concentration across countries. The second chapter, `The Aggregate Importance of Intermediate Input Substitutability', is co-authored with Stanford PhD graduate Cian Ruane. In this chapter we ask whether economic development policies should target specific sectors of the economy or follow a `big push' approach of advancing all sectors together. The relative success of these strategies is determined by how easily firms can substitute between intermediate inputs sourced from different sectors of the economy: a low degree of substitutability increases the costs from `bottleneck' sectors and the need for `big push' policies. We estimate long-run elasticities of substitution between intermediate inputs used by Indian manufacturing plants. We use detailed data on plant-level intermediate input expenditures, and exploit reductions in import tariffs as plausibly exogenous shocks to domestic intermediate input prices. We find a long-run plant-level elasticity of substitution of 4.3, a much higher level of substitutability than existing short-run estimates or the Cobb-Douglas benchmark. To quantify the aggregate importance of intermediate input substitution, we embed our elasticities in a general equilibrium model with heterogeneous firms, calibrated to plant- and sector-level data for the Indian economy. We find that the aggregate gains from a 50% productivity increase in any one Indian manufacturing sector are on average 47% larger with our estimated elasticities. Our counterfactual exercises highlight the importance of intermediate input substitution in amplifying policy reforms targeting individual sectors. The third chapter, `Distribution Costs and the Size of Indian Manufacturing Establishments', is also co-authored with Cian Ruane. We explore how productivity improvements in the distribution sectors of the Indian economy, such as transportation or wholesale trade, impact firms in the manufacturing sector. The sale of manufacturing goods involves costs of distribution such as shipping, insurance and commissions. Using micro-data from India's Annual Survey of Industries, we document that larger plants spend a larger share of their sales on distribution. We ask to what degree these distribution costs act as a constraint on larger firms and can explain the high employment share in small plants. To explore this mechanism, we develop a simple general equilibrium model in which heterogeneous firms face fixed and variable costs of distributing their products to customers. Firms selling higher quality products sell to more distant customers and incur higher distribution expenses. We carry out some preliminary quantitative exercises to explore how much TFP increases in the distribution sector affect aggregate consumption and the firm size distribution.

Essays on Macroeconomics

Author : Erin L. Wolcott
Publisher :
ISBN 13 :
Total Pages : 120 pages
Book Rating : 4.:/5 (994 download)

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Book Synopsis Essays on Macroeconomics by : Erin L. Wolcott

Download or read book Essays on Macroeconomics written by Erin L. Wolcott and published by . This book was released on 2017 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies three policy-oriented macroeconomic questions. The first chapter examines whether traditional monetary policy in the U.S. becomes less effective when foreign governments accumulate large amounts of Treasury debt. I estimate a macro-finance model and find foreign official purchases have shifted the entire yield curve down. This suggests the increasing presence of international factors in U.S. financial markets influences the Federal Reserve's interest rate policy. The second chapter asks why low-skilled men are less likely to be employed relative to high-skilled men and why this differential has increased since the 1970s. I build and calibrate a labor-search model and find a demand shift and job separations are the main drivers of employment inequality, while a supply shift had no robust effects, and search frictions actually reduced employment inequality since the 1970s. The third and final chapter studies why wages of newly hired workers are more pro-cyclical than wages of workers who do not switch jobs. We construct a novel measure of occupational mismatch by comparing a newly hired worker's current skill profile to his previous skill profile. Including our measure of occupational mismatch in standard wage regressions can account for half of the new hire wage cyclicality previously documented in the literature.

Essays in Macroeconomics and International Economics

Author : Dohyeon Lee
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (124 download)

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Book Synopsis Essays in Macroeconomics and International Economics by : Dohyeon Lee

Download or read book Essays in Macroeconomics and International Economics written by Dohyeon Lee and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter ["Optimal Monetary Policy in an Open Economy with Shocks to UIP"] studies optimal cooperative monetary policy between two symmetric countries where shocks to UIP (uncovered interest parity) lead to deviation from the UIP condition. UIP shock results in welfare loss because it distorts the relative consumption between the two countries, which would propagate into inefficient levels of output. Optimal monetary policy, while unable to affect the path of relative consumption, can improve efficiency compared to the flexible price allocation by reducing the distortions in output at the expense of a modest increase in price dispersion. Optimal capital control, in the form of discriminating the interest rates faced by the households and the financial intermediaries, would nullify the impact of UIP shock. The second chapter ["Offshoring and Segregation by Skill: Theory and Evidence"] (with Gueyon Kim) examines the labor market consequences of offshoring. We use the Danish employer-employee matched data together with the newly constructed skill measures to evaluate the effect of offshoring on wages and reallocation of workers within offshorable occupations. Offshoring reduces domestic worker wages; and increases the probability of reallocation away from the high-productivity firms to the low-productivity ones. The least skilled workers further face a greater risk of switching out to a less competitive sector. On the firm-side, offshoring improves the average skill of in-house workers at a lower cost. By estimating a worker-firm matching model, we examine the mechanisms of how offshoring affects labor market inequality and further assess the quantitative importance of various competing hypotheses such as technological change and the expansion of higher education, in addition to offshoring. We find substantially different effects: technology mainly increases the inequality between firms in terms of worker skill quality and average wages, while offshoring mitigates this rising trend. In the third chapter ["Selective Accumulation of Ideas: Accounting for the Decline in Entry Rate"], I explain the secular decline in entry rate of new firms using the mechanism of selective accumulation of ideas over time. In the model, an idea is a blueprint for a new product that arrives exogenously. An individual finds an idea of random quality drawn from an exogenous distribution, and makes an occupational choice of whether to become an entrepreneur using that idea, or to work for other entrepreneurs while discarding the idea. As ideas accumulate over time, the equilibrium threshold idea endogenously rises over time, and this would lower the rate of entry. With an expanding set of industries, the model also explains the industry life cycle, where the number of firms in each industry first increases and then decreases over time.

Redistribution, Inequality, and Growth

Author : Mr.Jonathan David Ostry
Publisher : International Monetary Fund
ISBN 13 : 1484397657
Total Pages : 30 pages
Book Rating : 4.4/5 (843 download)

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Book Synopsis Redistribution, Inequality, and Growth by : Mr.Jonathan David Ostry

Download or read book Redistribution, Inequality, and Growth written by Mr.Jonathan David Ostry and published by International Monetary Fund. This book was released on 2014-02-17 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Fund has recognized in recent years that one cannot separate issues of economic growth and stability on one hand and equality on the other. Indeed, there is a strong case for considering inequality and an inability to sustain economic growth as two sides of the same coin. Central to the Fund’s mandate is providing advice that will enable members’ economies to grow on a sustained basis. But the Fund has rightly been cautious about recommending the use of redistributive policies given that such policies may themselves undercut economic efficiency and the prospects for sustained growth (the so-called “leaky bucket” hypothesis written about by the famous Yale economist Arthur Okun in the 1970s). This SDN follows up the previous SDN on inequality and growth by focusing on the role of redistribution. It finds that, from the perspective of the best available macroeconomic data, there is not a lot of evidence that redistribution has in fact undercut economic growth (except in extreme cases). One should be careful not to assume therefore—as Okun and others have—that there is a big tradeoff between redistribution and growth. The best available macroeconomic data do not support such a conclusion.

Alternative Approaches in Macroeconomics

Author : Philip Arestis
Publisher : Springer
ISBN 13 : 3319696769
Total Pages : 373 pages
Book Rating : 4.3/5 (196 download)

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Book Synopsis Alternative Approaches in Macroeconomics by : Philip Arestis

Download or read book Alternative Approaches in Macroeconomics written by Philip Arestis and published by Springer. This book was released on 2018-02-07 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book honours Professor John McCombie’s retirement by exploring a variety of themes, theories and debates in non-orthodox macroeconomics. With contributions from leading scholars, the book covers diverse ground in economic thought, policy, empirical work and modelling. It demonstrates ongoing presumptions and asks probing questions of topical questions from the increase of income equality to the international variation of productivity investment. This collection will appeal to academics and students with an interest in the history of macroeconomic thinking.

In the Wake of the Crisis

Author : Olivier Blanchard
Publisher : MIT Press
ISBN 13 : 0262526824
Total Pages : 251 pages
Book Rating : 4.2/5 (625 download)

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Book Synopsis In the Wake of the Crisis by : Olivier Blanchard

Download or read book In the Wake of the Crisis written by Olivier Blanchard and published by MIT Press. This book was released on 2014-08-29 with total page 251 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prominent economists reconsider the fundamentals of economic policy for a post-crisis world. In 2011, the International Monetary Fund invited prominent economists and economic policymakers to consider the brave new world of the post-crisis global economy. The result is a book that captures the state of macroeconomic thinking at a transformational moment. The crisis and the weak recovery that has followed raise fundamental questions concerning macroeconomics and economic policy. These top economists discuss future directions for monetary policy, fiscal policy, financial regulation, capital-account management, growth strategies, the international monetary system, and the economic models that should underpin thinking about critical policy choices. Contributors Olivier Blanchard, Ricardo Caballero, Charles Collyns, Arminio Fraga, Már Guðmundsson, Sri Mulyani Indrawati, Otmar Issing, Olivier Jeanne, Rakesh Mohan, Maurice Obstfeld, José Antonio Ocampo, Guillermo Ortiz, Y. V. Reddy, Dani Rodrik, David Romer, Paul Romer, Andrew Sheng, Hyun Song Shin, Parthasarathi Shome, Robert Solow, Michael Spence, Joseph Stiglitz, Adair Turner