Essays On Macroeconomics And Finance With Search Frictions And Inequality

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Essays on Macroeconomics and Finance with Search Frictions and Inequality

Author : Gaston Chaumont
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (111 download)

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Book Synopsis Essays on Macroeconomics and Finance with Search Frictions and Inequality by : Gaston Chaumont

Download or read book Essays on Macroeconomics and Finance with Search Frictions and Inequality written by Gaston Chaumont and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two chapters. The first chapter, written jointly with Shouyong Shi, studies a directed search equilibrium with risk-averse workers who can search on the job and accumulate non-contingent assets at an exogenous rate of return and under a borrowing limit. Search outcomes affect earnings and wealth accumulation. In turn, wealth and earnings affect search decisions by changing the optimal tradeoff between the wage and the matching probability. The calibrated model yields sizable inequality in wages and wealth among homogeneous workers. Wealth significantly reduces a worker's transition rates from unemployment to employment and from one job to another. The interaction between search and wealth provides important self-insurance as it reduces the pass-through of earnings inequality into consumption by more than 60%, relative to the model without wealth accumulation. We also study the dynamic welfare effects of changes in the unemployment insurance (UI) benefit. Keeping UI's duration fixed, we find that welfare is maximized with a replacement rate of about 20% instead of the baseline 50%, together with lower taxes on wages to finance the lower expenditures on UI.The second chapter studies the interactions between default risk and the liquidity of the secondary market for sovereign bonds. The secondary market for sovereign bonds is illiquid and the liquidity is endogenous. Such endogenous liquidity has important effects on the credit spread and the probability of default. To study equilibrium implications of such liquidity, I integrate directed search in the secondary market into a macro model of sovereign default. The model generates liquidity endogenously because investors in the secondary market face a trade-off between the transaction costs and the trading probability. This trade-off varies with the aggregate state of the economy, creating a time-varying liquidity premium over the business cycle. I show that trade flows in the secondary market significantly affect the price of sovereign bonds and amplify the effect of default risk on credit spreads. The importance of liquidity in the secondary market increases when the economic conditions of the issuing country worsen. Illiquidity increases with default risk and accounts for a sizable fraction of credit spreads, ranging from 10% to 50%.

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 on Macroeconomics with Financial Frictions

Author : Matthew Knowles
Publisher :
ISBN 13 :
Total Pages : 198 pages
Book Rating : 4.:/5 (111 download)

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Download or read book Essays on Macroeconomics with Financial Frictions written by Matthew Knowles and published by . This book was released on 2017 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This dissertation consists of three essays concerning the macroeconomic implications of financial market frictions that limit the ability of firms to obtain external finance. Each of the three chapters employs a theoretical macroeconomic model, combined with some empirical analysis, to study unanswered questions in the literature related to the importance of these financial market frictions for the wider economy. The three chapters consider, in turn, the effect of banking crises on investment, output and employment, the implications of financial market frictions for optimal capital taxation, and the effect of banking deregulation on the distribution of income. The first chapter studies the long slumps in output and employment following banking crises. In a panel of OECD and emerging economies, I find that recessions are associated with larger initial drops in investment and more persistent drops in output if they occur simultaneously with banking crises. Furthermore, the banking crises that are followed by more persistent output slumps are associated with particularly large initial drops in investment. I show that these patterns can arise in a model where a financial shock temporarily increases the costs of external finance for investing entrepreneurs. This leads to a drop in investment and a persistent slump in output. Critical to the model is the distinction between different types of capital with different depreciation rates. Intangible capital and equipment have high depreciation rates, leading these stocks to drop substantially when investment falls after a financial shock. If wages display some rigidity, this induces a slump in output and employment that persists for roughly a decade, through the contribution of the decline in equipment and intangibles to declining production and labor demand. I find that this mechanism can account for almost a third of the persistent drop in output and employment in the US Great Recession (2007-2014). In the model, TFP and government spending shocks lead to relatively smaller declines in investment and less persistent drops in output; so the model is also consistent with the more transitory output drops seen after non-financial recessions, where such shocks may have been more important. The second chapter, based on work co-written with Corina Boar, considers the implications of financial market frictions for optimal linear capital taxation, in a setting where the government is concerned with redistribution. By including financial frictions, we emphasize the effect of a new channel affecting the equity-efficiency trade-off of redistribution: taxes affect the allocative efficiency of capital and, ultimately, total factor productivity. We find that high tax rates can be optimal, provided that they are applied to wealth, rather than risky capital. Under plausible parameter values, we find that the optimal tax on risky capital is lower than that on wealth, and roughly in line with current U.S. levels. This suggests welfare gains from taxing wealth at a higher rate than risky capital. The third chapter, based on work co-written with Corina Boar and Yicheng Wang, studies the effect of banking deregulation in the US on the distribution of income, from both a theoretical and empirical perspective. We focus on the effect of the removal of interstate banking and branching restrictions over the 1970-1994 period. We present a theoretical model based on Greenwood and Jovanovic (1990) to illustrate the channels through which this deregulation may affect the income distribution. In the model, income inequality rises after banking deregulation for some values of the parameters--because deregulation decreases the cost of borrowing, which primarily benefits wealthy firm-owners. We empirically estimate the effect of interstate banking and branching deregulation on income inequality by exploiting variations in the timing of deregulation across states. We find that the removal of banking restrictions increased the Gini coefficient by 6 percent in the long run."--Pages ix-xi.

Essays in Macroeconomics

Author : Vladimir A. Asriyan
Publisher :
ISBN 13 :
Total Pages : 109 pages
Book Rating : 4.:/5 (94 download)

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Book Synopsis Essays in Macroeconomics by : Vladimir A. Asriyan

Download or read book Essays in Macroeconomics written by Vladimir A. Asriyan and published by . This book was released on 2014 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: The research presented in this dissertation has been motivated by the Great Recession that has shown us once again how the financial system can amplify and propagate relatively mild economic shocks into larger scale recessions. In the past decade, we witnessed what many may call the worst crisis since the Great Depression that appears to have resulted from a perverse interaction between real estate markets and borrowers' balance sheets. The three chapters of this dissertation are an attempt to shed light on the mechanisms that may have allowed for such perverse effects to arise. I believe that to understand crisis episodes such as the recent one, it is imperative to study why some economic agents become overly exposed to risk, why financial markets fail to function at times, and what policy makers can do to ameliorate the incidence and repercussions of such adverse events. In Chapter 1, "A Theory of Balance Sheet Recessions with Informational and Trading Frictions," I propose a novel theory to rationalize the limited risk-sharing that drives balance sheet recessions as a result of informational and trading frictions in financial markets. I show that borrowers and creditors will find it costly to share macroeconomic risk in environments where creditors value the liquidity of financial claims but where information about the future states of the economy is dispersed and the secondary markets for financial claims feature search frictions. As a result, borrowers will optimally choose to retain disproportionate exposures to macroeconomic risk on their balance sheets, and adverse shocks will be amplified through the balance sheet channel. I show that the magnitude of this amplification becomes closely linked to the level of information dispersion and the severity of search frictions in financial markets. In this setting, I study the implications of the theory for macro-prudential regulation and find that subsidizing contingent write-downs of borrowers' liabilities can be welfare improving. In Chapter 2, "Informed Intermediation over the Cycle," a joint work with Victoria Vanasco, we construct a dynamic model of financial intermediation in which changes in the information held by financial intermediaries generate asymmetric credit cycles as the ones documented by Reinhart and Reinhart (2010). We model financial intermediaries as "expert'' agents who have a unique ability to acquire information about firm fundamentals. While the level of "expertise'' in the economy grows in tandem with information that the "experts'' possess, the gains from intermediation are hindered by informational asymmetries. We find the optimal financial contracts and show that the economy inherits not only the dynamic nature of information flow, but also the interaction of information with the contractual setting. We introduce a cyclical component to information by supposing that the fundamentals about which experts acquire information are stochastic. While persistence of fundamentals is essential for information to be valuable, their randomness acts as an opposing force and diminishes the value of expert learning. Our setting then features economic fluctuations due to waves of "confidence'' in the intermediaries' ability to allocate funds profitably. In Chapter 3, "Credit Crises, Liquidity Traps, and Demand Externalities," I extend the work of Eggertsson and Krugman (2012) to study welfare implications of households' consumption-saving decisions in New Keynesian economies with incomplete asset markets. My contribution is to show that due to aggregate demand externalities the amount of debt pre-contracted in such economies is generally excessive, and that the amount of "over-borrowing" is increasing in the Central Banker's inflation-aversion. This externality arises because an individual household does not internalize its contribution to the overall fragility as the latter is only a function of aggregate indebtedness of all borrowers. These findings suggest that macro-prudential policies geared towards limiting household leverage can indeed be welfare improving.

Three Essays in Macroeconomics and Finance

Author : David Henry Bowman
Publisher :
ISBN 13 :
Total Pages : 230 pages
Book Rating : 4.:/5 (33 download)

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Download or read book Three Essays in Macroeconomics and Finance written by David Henry Bowman and published by . This book was released on 1993 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Essays in Macro-finance

Author : Jiwei Zhang
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (138 download)

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Book Synopsis Essays in Macro-finance by : Jiwei Zhang

Download or read book Essays in Macro-finance written by Jiwei Zhang and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of four essays in macro-finance, focusing on the cause and effect of asset prices, inequality, and welfare. In particular, these essays highlight the role of institutions and structural changes in shaping outcomes of asset markets and of the macro-economy. The two overarching objectives of these essays are to analyze mechanisms of asset price movements and to understand how these asset price movements affect the daily lives of people. The four chapters of this dissertation examine the implications of inertia and stock market non-participation for equity prices, risk sharing, and wealth inequality; causal effects of Chinese Communist Party's cadre promotion system on land prices in China; interconnection between homeownership and marriage; fiscal responses to income inequality shocks. The first chapter quantifies the general equilibrium effects of financial innovation that increases access to equity markets. I study an overlapping generations model with both idiosyncratic and aggregate risk, solved with machine learning techniques. A benchmark economy with limited stock market participation and rebalancing frictions matches the current dynamics of macro aggregates, equity and bond returns, as well as wealth and portfolio concentration. A counterfactual experiment shows how widespread adoption of target date funds would improve risk sharing, reduce inequality, and generate substantial welfare gains for households in the bottom 90% of wealth distribution. The equity premium drops from 6.4% to 1.7%, while the standard deviation of equity returns stabilizes from 21.9% to 14.6%. Welfare implications vary with risk aversion and age. In general, the bottom 90% benefit from improved access to equity markets and better risk sharing, while the top 10% su↵er losses in wealth accumulation. Outcomes are very close between an economy with target date funds and one without any participation costs or rebalancing frictions. The second chapter identifies the causal effect of the Chinese Communist Party's performance- based promotion system to the country's real estate boom from 2003 to 2015. City-level leaders prioritizing economic growth allocate land at discounted prices to industrial firms rather than housing developers. Our analysis reveals that personal connections with provincial superiors are crucial for promotion and hence affect local land and housing supply. When city leaders share the same hometown as newly appointed provincial leaders, their chances of promotion increase by 15%, and GDP performances no longer matters. This connection reduces the need for industrial land allocation, resulting in a higher residential land supply in the city. In addition, cities with leaders who have hometown connections experience significantly higher supplies of residential land, and housing price growth rates are also 5% lower in these cities. The third chapter studies the phenomenon of marriage house in China and its effects on demo- graphics and homeownership. We first show empirical evidence for the complementarity between marriage and homeownership: single males with a marriage house (a house where the newlywed can move into) have 70% higher odds of getting married compared to their counterparts who do not have a marriage house. In addition, the timing of home purchase exhibits a clear cut-o↵ around the time of marriage, with the probability of purchasing a house peaking 0-2 years before marriage and slumping immediately after the time of marriage. Moreover, in the cross section, county house prices and average age at marriage are highly correlated in both level and in growth rate. We then quantify the marriage related incentives for homeownership using a lifecycle consumption-savings model with housing demand and ownership-dependent marriage shocks. In a counterfactual world where the marriage-house complementarity is absent, 45% of households under age 45 would delay their home purchases. Removing the marriage house friction from the marriage market would have slowed down the rise in age at first marriage by 40% between 1995 and 2010. Our results suggest that policies directed at either housing affordability or demographics can have significant consequences for both marriage and housing markets in China. Using data on U.S. state and federal taxes and transfers over the last quarter century, the fourth chapter estimates a regression model that yields the marginal effect of any shift of market income share from one quintile to another on the entire post tax, post-transfer income distribution. We identify exogenous income distribution changes and account for reverse causality using instruments based on exposure to international trade shocks, international commodity price shocks and national industry demand shocks, as well as lagged endogenous variables, with controls for the level of income, the business cycle and demographics. We find attenuation initially increases in quintile rank, peaks at the middle quintile and then falls for higher income quintiles, consistent with median voter political economy theory and the Stiglitz Director's law. We also provide evidence of considerable and systematic spillover effects on quintiles neither gaining nor losing in the "experiments, " also favoring the middle quintile. "Voting" and "income insurance" coalition analyses are presented. We find a strong negative relationship between average real income and the degree to which taxes and transfers are heavily redistributive.

Essays on Macroeconomics and Finance

Author : Juan Ricardo De la O Flores
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (115 download)

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Download or read book Essays on Macroeconomics and Finance written by Juan Ricardo De la O Flores and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays that examine the role of institutional frictions and belief formation in understanding financial and macroeconomic puzzles. In two chapters, I study on the transmission channels by which institutional frictions impact aggregate business cycles. In another chapter I explore the link between belief formation and aggregate asset price dynamics. In the first chapter, I study the macroeconomic effects of a 1982 SEC rule that made share buybacks a viable alternative to dividends for paying out funds to shareholders. I propose a quantitative model of heterogeneous firms with dividend adjustment costs and a manager-shareholder conflict, matched to micro data on US corporations' cash flow statements. The flexibility of buybacks improves welfare by reducing the misallocation of capital. This is not only because investors can more easily shift resources to more productive firms, but also because stock prices become more responsive to productivity and thus help align incentives of managers and shareholders. This "stock price effect" allows the model to not only account for a decline in investment and increase in productivity, but also the increase in corporate cash holdings over the last decades. In the second chapter, co-authored with Sean Myers, we study how shareholder beliefs and firm payout decisions affect aggregate asset prices. Using survey forecasts, we find that cash flow growth expectations explain most movements in the S\& P 500 price-dividend and price-earnings ratios, accounting for at least 93\% and 63\% of their variation. These expectations comove strongly with price ratios, even when price ratios do not predict future cash flow growth. In comparison, return expectations have low volatility and small comovement with price ratios. Short-term, rather than long-term, expectations account for most price ratio variation. We propose an asset pricing model with beliefs about earnings growth reversal that accurately replicates these cash flow growth expectations and dynamics. In the third chapter, co-authored with Stephen McKnight, we study how institutional frictions in developing economies impact business cycles. This chapter investigates the role of labor informality in the propagation of transitory shocks and its implications for interest rate policy in preventing self-fulfilling inflation expectations. We develop a dynamic New Keynesian model where the size of the informal sector reacts to search and matching frictions in the formal sector, which can account for the observed behavior of formal and informal employment in Mexico. We show that informality reduces the volatility of aggregate consumption and employment, but investment volatility increases. While informality amplifies the propagation of demand shocks on inflation, it dampens the response of output, weakening the transmission mechanism of monetary policy to output. For interest-rate feedback rules that react to formal measures of inflation, we find that informality significantly restricts the ability of the Taylor principle to ensure determinacy. However, we show that determinacy can be restored when policy also responds to formal output.

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 in Macroeconomics and Finance

Author : Pavel Krivenko
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (14 download)

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Download or read book Essays in Macroeconomics and Finance written by Pavel Krivenko and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the role of financial frictions, uncertainty, and heterogeneity for financial markets and for the real economy. In terms of tools, it uses quantitative models with incomplete markets and heterogeneous agents, and disciplines these models with micro data. The dissertation consists of two essays. The first essay explores the role of unemployment scars - the large, long-lasting impact of unemployment on future earnings - for the U.S. housing bust. The second essay proposes a simple perturbation approach for dynamic models with agents who differ in their perception of exogenous shocks, and applies it, among other things, to study the asset premia that arise from Knightian uncertainty.

Three Essays on Macroeconomics and Financial Frictions

Author : Tiezheng Song
Publisher :
ISBN 13 :
Total Pages : 153 pages
Book Rating : 4.:/5 (11 download)

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Book Synopsis Three Essays on Macroeconomics and Financial Frictions by : Tiezheng Song

Download or read book Three Essays on Macroeconomics and Financial Frictions written by Tiezheng Song and published by . This book was released on 2019 with total page 153 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Essays on Financial Macroeconomics and Inequality

Author : Ignacio Gonzalez
Publisher :
ISBN 13 :
Total Pages : 98 pages
Book Rating : 4.:/5 (18 download)

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Book Synopsis Essays on Financial Macroeconomics and Inequality by : Ignacio Gonzalez

Download or read book Essays on Financial Macroeconomics and Inequality written by Ignacio Gonzalez and published by . This book was released on 2016 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is composed of three self-contained chapters on the same topic: the impact of financial markets on inequality. The first paper investigates the connection between the increase of equity wealth, the rise stock-market returns, the slowdown of corporate investment and the decline of the labor share in the U.S. economy. I use a version of the standard heterogeneous-agent model to explain the connection of these phenomena and I identify three driving forces. In particular, I show that the fall of the average marginal tax on capital income, the reduction of stock-market costs and a higher inclination towards corporate short-termism explain the decrease of investment and the rise of equity prices. This way, the model predicts an endogenous upsurge of equity Tobin's Q and, importantly, the rise of equity returns. The decline of the labor share occurs in response to investment sluggishness when capital and labor are complements, which requires an elasticity of substitution consistent with the values found in the literature. Given the predictions of the model, the paper solves what Joseph Stiglitz has recently called the Piketty puzzle: why has the wealth-output ratio and capital returns increased, while wages have not. The second paper, which is joint work with Pedro Trivin, extends the previous analysis to a panel of countries. We use a reduced-form framework with wealth in the utility function to obtain an estimable equation and, by using recent panel time-series techniques, we find that the increase in Tobin's Q explain almost 60 per cent of the total decline in the labor share. The third paper makes a theoretical contribution to recent debate on secular stagnation. I use a growth model with imperfect competition to show that the rise of monopoly rents is consistent with several investment and inequality dynamics that have characterized the post-1980 stagnant era.

Essays in Macroeconomics

Author : Michele Fornino
Publisher :
ISBN 13 :
Total Pages : 222 pages
Book Rating : 4.:/5 (133 download)

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Download or read book Essays in Macroeconomics written by Michele Fornino and published by . This book was released on 2021 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the second chapter, Elia Sartori and I present a wage posting model with search frictions where idiosyncratic shocks to optimal firm size generate different returns to adjusting the workforce. Our approach takes the firms as the only decision makers, and it assumes a simple employment contract: firms pay a wage and may only change an employment relationship by paying exogenously specified costs. Labor market outcomes are modeled as a mean field game equilibrium in which aggregate statistics impacting firms' policies, which play the role of prices, are the hiring and poaching flow rates. Consistency of aggregate choices with prices builds on a reduced form matching function which subsumes the entire functioning of the labor market outside of firms. Leveraging and extending recently developed numerical methods, we can solve for the equilibrium. The model delivers nontrivial policy functions and aggregates, which can be used to quantify features of the endogenous reshuffling of workers both in the size ladder and in the wage ladder, including net poaching along these two margins, as presented in, e.g., Haltiwanger et al. (2017). A calibrated version of the model is able to generate an inverted net poaching schedule which is consistent with their finding that smaller firms poach workers from larger ones.

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.

Essays on the Macroeconomics of Inequality

Author : Zsofia Luca Barany
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (776 download)

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Download or read book Essays on the Macroeconomics of Inequality written by Zsofia Luca Barany and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains three essays on the macroeconomics of inequality. The first chapter analyses the effects of minimum wages on inequality. While there has been intense debate in the empirical literature about the effects of minimum wages on inequality in the US, its general equilibrium effects have been given little attention. In order to quantify the full effects of a decreasing minimum wage on inequality, I build a dynamic general equilibrium model, based on a two-sector growth model where the supply of high-skilled workers and the direction of technical change are endogenous. I find that a permanent reduction in the minimum wage leads to an expansion of low-skilled employment, which increases the incentives to acquire skills, thus changing the composition and size of high-skilled employment. These permanent changes in the supply of labour alter the investment ow into R & D, thereby decreasing the skill-bias of technology. The reduction in the minimum wage has spill-over effects on the entire distribution, affecting upper-tail inequality. Through a calibration exercise, I find that a 30 percent reduction in the real value of the minimum wage, as in the early 1980s, accounts for 15 percent of the subsequent rise in the skill premium, 18.5 percent of the increase in overall inequality, 45 percent of the increase in inequality in the bottom half, and 7 percent of the rise in inequality at the top half of the wage distribution. In the second chapter, I construct a model, where the supply of skills and the skill premium can increase jointly, as occurred in the US over the past few decades. I high- light the importance of the joint determination of the direction of technical change and skill formation. There is a positive feedback between these two variables. Technological progress is driven by profit oriented R & D firms, where profits are increasing in the amount of labour that is able to use these technologies. Therefore, when the supply of high-skilled 3labour increases, technology endogenously becomes more skill-biased. A more skill-biased technology leads to a higher skill premium, which increases the incentives to acquire educa- tion, and the supply of high-skilled labour rises. During the transition to the steady state, both quantities increase simultaneously. I map the dependence of the transition path of the economy on the initial skill supply and relative technology between the high- and the low-skilled sector. I find that, contrary to the previous literature, the skill premium and the skill supply can increase jointly even if the bias of technology is weak. In the third chapter, I relate the degree of progressivity of the income tax scheme to the prevailing income inequality in the society. I find that, consistent with the data, more unequal societies implement more progressive income tax systems. I build a model of political coalition formation, where different income groups have to agree on a tax scheme to finance the public good. I show that, the greater income inequality is, i.e. the further away the rich are from the rest of the population, the less able they are to credibly commit to participating in a coalition. Therefore, as income inequality rises, the rich are increasingly excluded from the design of the income tax scheme. Consequently, the rich bear a larger fraction of the public good, and the tax system becomes more progressive.

Essays in Macroeconomics

Author : Fernando A. Alvarez-Parra
Publisher :
ISBN 13 :
Total Pages : 222 pages
Book Rating : 4.:/5 (272 download)

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Book Synopsis Essays in Macroeconomics by : Fernando A. Alvarez-Parra

Download or read book Essays in Macroeconomics written by Fernando A. Alvarez-Parra and published by . This book was released on 2008 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Essays in Dynamics Macroeconomics with Market Frictions

Author : Chia-Ying Chang
Publisher :
ISBN 13 :
Total Pages : 288 pages
Book Rating : 4.:/5 (522 download)

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Book Synopsis Essays in Dynamics Macroeconomics with Market Frictions by : Chia-Ying Chang

Download or read book Essays in Dynamics Macroeconomics with Market Frictions written by Chia-Ying Chang and published by . This book was released on 2002 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Essays on Macroeconomics with Heterogeneity and Inequality

Author : Zhigang Ge
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ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (124 download)

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Book Synopsis Essays on Macroeconomics with Heterogeneity and Inequality by : Zhigang Ge

Download or read book Essays on Macroeconomics with Heterogeneity and Inequality written by Zhigang Ge and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract Chapter 1. Heterogeneous Entrepreneurial Ability and Wealth Inequality Models with entrepreneurship can reproduce high wealth concentration at the top. The key assumption is the borrowing constraint, that is, households are unable to borrow enough assets to start a business or invest optimally in the business. However, some empirical evidences show that borrowing constraint does not matter for the majority of households in the US. This paper seeks to generate high wealth concentration at the top without assuming borrowing constraint. The baseline model that introduces heterogeneity in entrepreneurial ability is able to match the wealth distribution while the model assuming same entrepreneurial ability fails. Besides wealth distribution, the baseline model generates other moments that are consistent with the data. Chapter 2. Taxing Top Earners: The Role of Entrepreneurs This paper studies the optimal top marginal income tax rate in a quantitative framework with entrepreneurial choice, financing constraints, and realistic earnings and wealth distributions. I find that the revenue-maximizing top tax rate is approximately 41 percent -- close to the recent levels in the US. In contrast, when calibrated with only workers to match realistic earnings and wealth distributions, the model predicts a revenue-maximizing top tax rate of 81 percent -- close to the established view. There are two channels through which the baseline model has a lower revenue-maximizing top tax rate. First, the wealth distribution channel: increasing the top tax rate decreases wealth accumulation and leads to a less skewed wealth distribution in the long run (there are more top entrepreneurs with low wealth and less top entrepreneurs with high wealth). With financing constraints, there is a similar change in the business earnings distribution, implying a fall in the average business earnings at the top. Second, the general equilibrium effect on labor earnings of workers: in the model with entrepreneurs, increasing the top tax rate reduces the capital stock much more than labor supply, which decreases the capital-labor ratio and thus the equilibrium wage rate in the model economy. Finally, I find that the welfare-maximizing top marginal income tax rate is close to the revenue-maximizing one. Chapter 3. Household Heterogeneity and Consumption Amplification Macroeconomic models with household heterogeneity in wealth can generate larger consumption response to aggregate shocks compared to a representative-agent economy. In other words, there is consumption amplification associated with wealth heterogeneity. However, I find that in a Krusell-Smith type real business cycle (RBC) model, this amplification effect is only significant at the onset of a recession and gradually dies out as the recession proceeds. The finding is of interest because part of the motivation for the widely adoption of models with wealth heterogeneity is their different and empirically plausible implications for consumption dynamics compared with representative-agent models. I then introduce household heterogeneity in housing and find that the model with housing has more persistent amplification effect on consumption during the recession.