This paper studies how labor market power affects firm dynamics and aggregate productivity. We build a dynamic model of neoclassical monopsony with occupational choice, firm growth, and productivity-enhancing technology adoption. Labor market power lowers efficiency and leads to aggregate output losses by distorting the allocation of labor, entrepreneurship, and innovation decisions. The model is consistent with cross-country evidence of higher life cycle firm growth and higher productivity investment in more competitive labor markets and can explain 25 percent of the differences in aggregate productivity across countries. We find that about 85 percent of the losses are attributable to the lack of technology adoption induced by weaker labor market competition, suggesting that efficiency losses may be greater than those estimated by previous studies.
{"title":"Firm dynamics, monopsony, and aggregate productivity differences","authors":"Tristany Armangué-Jubert , Tancredi Rapone , Alessandro Ruggieri","doi":"10.1016/j.red.2025.101321","DOIUrl":"10.1016/j.red.2025.101321","url":null,"abstract":"<div><div>This paper studies how labor market power affects firm dynamics and aggregate productivity. We build a dynamic model of neoclassical monopsony with occupational choice, firm growth, and productivity-enhancing technology adoption. Labor market power lowers efficiency and leads to aggregate output losses by distorting the allocation of labor, entrepreneurship, and innovation decisions. The model is consistent with cross-country evidence of higher life cycle firm growth and higher productivity investment in more competitive labor markets and can explain 25 percent of the differences in aggregate productivity across countries. We find that about 85 percent of the losses are attributable to the lack of technology adoption induced by weaker labor market competition, suggesting that efficiency losses may be greater than those estimated by previous studies.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"59 ","pages":"Article 101321"},"PeriodicalIF":2.1,"publicationDate":"2026-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145924702","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-02DOI: 10.1016/j.red.2025.101319
Ia Vardishvili
This paper demonstrates that the option to delay entry plays an important role in shaping the business cycle behavior of new firms. Using a model calibrated to U.S. firm dynamics, I show that the timing option endogenously generates a countercyclical opportunity cost of entry: during recessions, elevated risk of failure increases the value of waiting, which raises the effective cost of entry. I provide empirical evidence consistent with firms strategically delaying entry in response to changing aggregate conditions. Quantitatively, this channel significantly amplifies firm selection at entry and nearly doubles the cyclical volatility of new firm creation. Overall, variation in the number and composition of entrants accounts for 18 % of aggregate employment fluctuations—a contribution more than halved in a model without the option to delay. Ignoring this channel may also lead to misleading predictions about how new firm entry responds to policy interventions.
{"title":"Entry decision, the option to delay entry, and business cycles","authors":"Ia Vardishvili","doi":"10.1016/j.red.2025.101319","DOIUrl":"10.1016/j.red.2025.101319","url":null,"abstract":"<div><div>This paper demonstrates that the option to delay entry plays an important role in shaping the business cycle behavior of new firms. Using a model calibrated to U.S. firm dynamics, I show that the timing option endogenously generates a countercyclical opportunity cost of entry: during recessions, elevated risk of failure increases the value of waiting, which raises the effective cost of entry. I provide empirical evidence consistent with firms strategically delaying entry in response to changing aggregate conditions. Quantitatively, this channel significantly amplifies firm selection at entry and nearly doubles the cyclical volatility of new firm creation. Overall, variation in the number and composition of entrants accounts for 18 % of aggregate employment fluctuations—a contribution more than halved in a model without the option to delay. Ignoring this channel may also lead to misleading predictions about how new firm entry responds to policy interventions.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"59 ","pages":"Article 101319"},"PeriodicalIF":2.1,"publicationDate":"2025-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145684541","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-29DOI: 10.1016/j.red.2025.101318
Heejeong Kim, Jung Hwan Kim
This paper examines the quantitative implications of rising college costs, wage inequality, and delinquency for the growth of student debt in the U.S. Rising college costs and wage inequality are introduced as exogenous inputs into an incomplete-markets overlapping-generations model with choices of college attendance, student loans, and delinquency. In the benchmark economy, aggregate student debt rises by $314 billion between 1985 and 2014, accounting for approximately 64 % of the observed rise in undergraduate student loans in the U.S. The rise in college costs is the primary driver of the increased borrowing, while the rise in income risk and the decline in student ability lead to higher delinquency rates. Increasing delinquency significantly amplifies debt accumulation: in a counterfactual economy without the option of becoming delinquent, debt increases by only $178 billion. Finally, we show that income-driven repayment (IDR) plans can substantially moderate debt growth, leading to an increase of only $169 billion. This effect arises because IDR reduces delinquency rates by offering greater repayment flexibility.
{"title":"Sources of rising student debt in the U.S.: College costs, wage inequality, and delinquency","authors":"Heejeong Kim, Jung Hwan Kim","doi":"10.1016/j.red.2025.101318","DOIUrl":"10.1016/j.red.2025.101318","url":null,"abstract":"<div><div>This paper examines the quantitative implications of rising college costs, wage inequality, and delinquency for the growth of student debt in the U.S. Rising college costs and wage inequality are introduced as exogenous inputs into an incomplete-markets overlapping-generations model with choices of college attendance, student loans, and delinquency. In the benchmark economy, aggregate student debt rises by $314 billion between 1985 and 2014, accounting for approximately 64 % of the observed rise in undergraduate student loans in the U.S. The rise in college costs is the primary driver of the increased borrowing, while the rise in income risk and the decline in student ability lead to higher delinquency rates. Increasing delinquency significantly amplifies debt accumulation: in a counterfactual economy without the option of becoming delinquent, debt increases by only $178 billion. Finally, we show that income-driven repayment (IDR) plans can substantially moderate debt growth, leading to an increase of only $169 billion. This effect arises because IDR reduces delinquency rates by offering greater repayment flexibility.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"59 ","pages":"Article 101318"},"PeriodicalIF":2.1,"publicationDate":"2025-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145684542","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-19DOI: 10.1016/j.red.2025.101317
Marc Folch , Luca Mazzone
Student debt decreases post-bachelor school enrollment and earnings growth but does not delay first-time home ownership. We introduce a life-cycle human capital model with wealth heterogeneity and financial frictions and show that high debt balances distort career choices because returns to further education depend on current income. Student debt impacts home ownership in two ways. First, it deters ownership via the traditional wealth channel. Second, it increases ownership by discouraging further education in favor of early labor market entry. Finally, we discuss the impact of student borrowing under different loan repayment schemes.
{"title":"Go big or buy a home: The impact of student debt on career and housing choices","authors":"Marc Folch , Luca Mazzone","doi":"10.1016/j.red.2025.101317","DOIUrl":"10.1016/j.red.2025.101317","url":null,"abstract":"<div><div>Student debt decreases post-bachelor school enrollment and earnings growth but does not delay first-time home ownership. We introduce a life-cycle human capital model with wealth heterogeneity and financial frictions and show that high debt balances distort career choices because returns to further education depend on current income. Student debt impacts home ownership in two ways. First, it deters ownership via the traditional wealth channel. Second, it increases ownership by discouraging further education in favor of early labor market entry. Finally, we discuss the impact of student borrowing under different loan repayment schemes.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"59 ","pages":"Article 101317"},"PeriodicalIF":2.1,"publicationDate":"2025-11-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145571185","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-10DOI: 10.1016/j.red.2025.101309
Sebastian Graves , Victoria Gregory , Lars Ljungqvist , Thomas J. Sargent
The Heckman et al. (1998a) (HLT) model includes credit markets and within-period labor supply indivisibilities, two essential features of Ljungqvist and Sargent (2006) “time-averaging” models. But by assuming inelastic labor supplies until a mandatory retirement age, it shuts down time-averaging. We activate time-averaging by endogenizing retirement ages. Our addition of a baseline social security system puts all workers at corner solutions of their retirement decisions, letting our model reproduce most outcomes in HLT's model. By dislodging workers from those corners, social security and tax reforms raise the aggregate labor supply elasticity and can bring about a “dual labor market.” HLT's Ben-Porath human capital technologies generate steeper earnings profiles for college-educated workers that in our model make their labor supplies more resilient to tax and social security reforms than high school workers' labor supplies. But nonconvexities inherent in the Ben-Porath technologies can bring “tipping points” at which tax increases cause workers who at lower tax rates had chosen long careers and made substantial human capital investments to jump discretely to choosing much shorter careers and doing much less on-the-job human capital accumulation.
Heckman et al. (1998a) （HLT）模型包括信贷市场和时期内劳动力供给不可分割性，这是Ljungqvist和Sargent（2006）“时间平均”模型的两个基本特征。但是，通过假设劳动力供应在法定退休年龄之前没有弹性，它关闭了时间平均。我们通过内生退休年龄激活时间平均。我们增加了一个基本的社会保障系统，使所有工人都处于退休决定的边缘解决方案，使我们的模型重现了HLT模型中的大多数结果。社会保障和税收改革通过将工人从这些角落转移出去，提高了总劳动力供给弹性，并可能带来“双重劳动力市场”。HLT的Ben-Porath人力资本技术为受过大学教育的工人创造了更陡峭的收入曲线，在我们的模型中，这使得他们的劳动力供应比高中工人的劳动力供应更能适应税收和社会保障改革。但本-波拉斯技术固有的非凸性可能带来“引爆点”，即增税会导致那些在较低税率下选择长期职业并进行大量人力资本投资的工人，转而选择更短的职业生涯，更少地进行在职人力资本积累。
{"title":"Time averaging meets Heckman, Lochner, and Taber and Ben-Porath","authors":"Sebastian Graves , Victoria Gregory , Lars Ljungqvist , Thomas J. Sargent","doi":"10.1016/j.red.2025.101309","DOIUrl":"10.1016/j.red.2025.101309","url":null,"abstract":"<div><div>The <span><span>Heckman et al. (1998a)</span></span> (HLT) model includes credit markets and within-period labor supply indivisibilities, two essential features of <span><span>Ljungqvist and Sargent (2006)</span></span> “time-averaging” models. But by assuming inelastic labor supplies until a mandatory retirement age, it shuts down time-averaging. We activate time-averaging by endogenizing retirement ages. Our addition of a baseline social security system puts all workers at corner solutions of their retirement decisions, letting our model reproduce most outcomes in HLT's model. By dislodging workers from those corners, social security and tax reforms raise the aggregate labor supply elasticity and can bring about a “dual labor market.” HLT's Ben-Porath human capital technologies generate steeper earnings profiles for college-educated workers that in our model make their labor supplies more resilient to tax and social security reforms than high school workers' labor supplies. But nonconvexities inherent in the Ben-Porath technologies can bring “tipping points” at which tax increases cause workers who at lower tax rates had chosen long careers and made substantial human capital investments to jump discretely to choosing much shorter careers and doing much less on-the-job human capital accumulation.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"59 ","pages":"Article 101309"},"PeriodicalIF":2.1,"publicationDate":"2025-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145546709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-01DOI: 10.1016/j.red.2025.101308
J. Carter Braxton , Bledi Taska
We examine the role of technological change in shaping insurance to the unemployed. We integrate technological change, occupation choice, and employment risk into a Bewley-style economy to examine the optimal combination of retraining subsidies and public insurance transfers for unemployed workers. We find that the optimal policy introduces a retraining subsidy to unemployed workers and increases the generosity of transfers to the unemployed relative to current U.S. policy. The utilitarian government incorporates retraining subsidies as part of an optimal policy as they provide additional, longer run, consumption insurance after job loss while imposing only modest increases in distortionary taxes. In the absence of technological change, a utilitarian government sets a lower subsidy on the tuition cost of retraining as earnings declines after job loss are less persistent.
{"title":"Technological change and insuring job loss","authors":"J. Carter Braxton , Bledi Taska","doi":"10.1016/j.red.2025.101308","DOIUrl":"10.1016/j.red.2025.101308","url":null,"abstract":"<div><div>We examine the role of technological change in shaping insurance to the unemployed. We integrate technological change, occupation choice, and employment risk into a Bewley-style economy to examine the optimal combination of retraining subsidies and public insurance transfers for unemployed workers. We find that the optimal policy introduces a retraining subsidy to unemployed workers and increases the generosity of transfers to the unemployed relative to current U.S. policy. The utilitarian government incorporates retraining subsidies as part of an optimal policy as they provide additional, longer run, consumption insurance after job loss while imposing only modest increases in distortionary taxes. In the absence of technological change, a utilitarian government sets a lower subsidy on the tuition cost of retraining as earnings declines after job loss are less persistent.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"58 ","pages":"Article 101308"},"PeriodicalIF":2.1,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145415244","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-01DOI: 10.1016/j.red.2025.101307
Antoine Bertheau , Rune Vejlin
Using a unique dataset that combines daily employment spell information with firm-level accounting data from Denmark, we explore workers' progression up firm wage and productivity ladders. We find that: (1) Total Factor Productivity (TFP) emerges as a more effective indicator of the job ladder than the average wage paid, with more workers experiencing employer-to-employer transitions from lower to upper tiers of the productivity ladder compared to the wage ladder. (2) Recessions have a cleansing effect when using the productivity job ladder: Lower productivity firms experience a steeper decline in employment growth compared to their higher-tier counterparts. In contrast, due to decreased poaching, high wage firms exhibit greater employment reductions, leading to a sullying effect when using the wage job ladder. High productivity firms also experience greater employment cyclicality due to decreased poaching during recessions. However, firms at the lower end of the productivity spectrum face a more pronounced employment reduction during recessions as they intensify layoffs and reduce hiring from the unemployment pool. (3) Indirect productivity measures, such as sales per worker, can hide or even reverse the cleansing effect of recessions.
{"title":"Job ladders by firm wage and productivity","authors":"Antoine Bertheau , Rune Vejlin","doi":"10.1016/j.red.2025.101307","DOIUrl":"10.1016/j.red.2025.101307","url":null,"abstract":"<div><div>Using a unique dataset that combines daily employment spell information with firm-level accounting data from Denmark, we explore workers' progression up firm wage and productivity ladders. We find that: (1) Total Factor Productivity (TFP) emerges as a more effective indicator of the job ladder than the average wage paid, with more workers experiencing employer-to-employer transitions from lower to upper tiers of the productivity ladder compared to the wage ladder. (2) Recessions have a cleansing effect when using the productivity job ladder: Lower productivity firms experience a steeper decline in employment growth compared to their higher-tier counterparts. In contrast, due to decreased poaching, high wage firms exhibit greater employment reductions, leading to a sullying effect when using the wage job ladder. High productivity firms also experience greater employment cyclicality due to decreased poaching during recessions. However, firms at the lower end of the productivity spectrum face a more pronounced employment reduction during recessions as they intensify layoffs and reduce hiring from the unemployment pool. (3) Indirect productivity measures, such as sales per worker, can hide or even reverse the cleansing effect of recessions.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"58 ","pages":"Article 101307"},"PeriodicalIF":2.1,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145361004","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-01DOI: 10.1016/j.red.2025.101306
Rui Li , Noah Williams
Recent years have seen episodes of managers subjecting firms to large losses. We develop a dynamic moral hazard model where a manager may divert funds, and also take actions yielding current payoffs, but increasing risks of losses. We show that pay-for-performance contracts exacerbate the risk management friction, then characterize the optimal risk management contract. We solve two examples. One is explicitly solvable, and the optimal contract can be implemented with simple instruments including “clawback” of promised bonuses. The second example shows that it may be optimal for the owner to forgo risk management, allowing the manager to take excess risk.
{"title":"Optimal contracts with hidden risk","authors":"Rui Li , Noah Williams","doi":"10.1016/j.red.2025.101306","DOIUrl":"10.1016/j.red.2025.101306","url":null,"abstract":"<div><div>Recent years have seen episodes of managers subjecting firms to large losses. We develop a dynamic moral hazard model where a manager may divert funds, and also take actions yielding current payoffs, but increasing risks of losses. We show that pay-for-performance contracts exacerbate the risk management friction, then characterize the optimal risk management contract. We solve two examples. One is explicitly solvable, and the optimal contract can be implemented with simple instruments including “clawback” of promised bonuses. The second example shows that it may be optimal for the owner to forgo risk management, allowing the manager to take excess risk.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"58 ","pages":"Article 101306"},"PeriodicalIF":2.1,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145361005","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-17DOI: 10.1016/j.red.2025.101304
Junmin Liao , Xiang Sun , Wei Wang
The standard non-homothetic CES preference imposes parametric constraints on the relationship between price and income elasticities. This paper shows these parametric constraints are empirically implausible for certain sectors. We address this issue by introducing an extended parametric restriction that removes these constraints. We fully characterize the extended non-homothetic CES preference and show that it retains all the desirable properties of the standard non-homothetic CES preference. Importantly, the extended non-homothetic CES preference is not restricted for conducting empirical and quantitative exercises in macro-development models. It thus offers a flexible workhorse model for macro development and related fields.
{"title":"The extended non-homothetic CES preference","authors":"Junmin Liao , Xiang Sun , Wei Wang","doi":"10.1016/j.red.2025.101304","DOIUrl":"10.1016/j.red.2025.101304","url":null,"abstract":"<div><div>The standard non-homothetic CES preference imposes parametric constraints on the relationship between price and income elasticities. This paper shows these parametric constraints are empirically implausible for certain sectors. We address this issue by introducing an extended parametric restriction that removes these constraints. We fully characterize the extended non-homothetic CES preference and show that it retains all the desirable properties of the standard non-homothetic CES preference. Importantly, the extended non-homothetic CES preference is not restricted for conducting empirical and quantitative exercises in macro-development models. It thus offers a flexible workhorse model for macro development and related fields.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"58 ","pages":"Article 101304"},"PeriodicalIF":2.1,"publicationDate":"2025-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145117891","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
扫码关注我们
求助内容：
应助结果提醒方式：
京公网安备 11010802042870号