Review of Economic Dynamics最新文献

The intertemporal substitution (Frisch) elasticity of labor supply governs how structural models predict changes in people's willingness to work in response to changes in economic conditions or government fiscal policy. We show that the mean reported estimates of the elasticity are exaggerated due to publication bias. For both the intensive and extensive margins the literature provides over 700 estimates, with a mean of 0.5 in both cases. Correcting for publication bias and emphasizing quasi-experimental evidence reduces the mean intensive margin elasticity to 0.2 and renders the extensive margin elasticity tiny. A total hours elasticity of about 0.25 is the most consistent with empirical evidence. To trace the differences in reported elasticities to differences in estimation context, we collect 23 variables reflecting study design and employ Bayesian and frequentist model averaging to address model uncertainty. On both margins the elasticity is systematically larger for women and workers near retirement, but not enough to support a total hours elasticity above 0.5.

We derive an optimal labor income tax rate formula for urban models that nests the Mirrlees model as a limiting case. Optimal tax rates are determined by traditional forces plus a new term arising from urban forces: house price, migration and agglomeration effects. Based on the earnings distribution, housing costs and housing tenure in large and small US cities, we find that in a benchmark model (i) the optimal income tax rate schedule is U-shaped, (ii) urban forces raise the optimal tax rate schedule at all income levels and (iii) adopting an optimal tax system induces agents with low skill levels to leave large, productive cities.

Empirical literature has documented that the persistence of the gap between inflation and its trend declined after the Volcker disinflation. Previous studies into the source of the decline in inflation gap persistence have offered competing views while sidestepping the possibility of equilibrium indeterminacy. We examine the source of the decline by estimating a medium-scale dynamic stochastic general equilibrium model using Bayesian methods that allow for indeterminacy. We show that the Fed's change from a passive to an active policy response to the inflation gap or a decrease in firms' probability of price change can fully account for the decline in inflation gap persistence by ruling out indeterminacy that induces persistent economic dynamics.

We develop and estimate a DSGE model to evaluate the economic repercussions of cryptocurrency. In our model, cryptocurrency offers an alternative currency option to government currency, with endogenous supply and demand. We uncover a substitution effect between the real balances of government currency and cryptocurrency in response to technology, preferences and monetary policy shocks. We find that an increase in cryptocurrency productivity induces a rise in the relative price of government currency with respect to cryptocurrency. Since cryptocurrency and government currency are highly substitutable, the demand for the former increases whereas it drops for the latter. Our historical decomposition analysis shows that fluctuations in the cryptocurrency price are mainly driven by shocks in cryptocurrency demand, whereas changes in the real balances for government currency are mainly attributed to government currency and cryptocurrency demand shocks.

This paper shows analytically that introducing diminishing returns to labor at the firm level into the Diamond-Mortensen-Pissarides model, followed by recalibration, does not change aggregate dynamics of unemployment and vacancies. This invariance result holds for several standard calibration strategies developed for the model with constant returns, alternative bargaining solutions for the setting with diminishing returns, and different sources of diminishing returns. Invariance makes precise in which sense the common practice of abstracting from diminishing returns is innocuous. It provides an analytical benchmark for quantitative findings obtained in models that do combine a Diamond-Mortensen-Pissarides labor market with diminishing returns at the firm level.

In the US economy, Black men, on average, receive lower wages than White men, and the difference increases over the working life. The employment rate and the number of hours worked are also lower for Blacks, but the gap is nearly constant. Together these facts suggest that on-the-job human capital accumulation might explain the diverging wages. However, the wage gap and its evolution over the lifecycle cannot be explained by differences in accumulated experience or educational attainment for the cohort we analyze. Instead, the combination of experience and test scores measured at ages 17-22 accounts for the wage gap and its growth. We propose an on-the-job human capital accumulation model with heterogeneity in the initial human capital endowment and the lifelong ability to accumulate human capital, and endogenous labor supply at the extensive and intensive margins to explain the evolution of the Black-White wage gap over the lifecycle. We discipline the distribution of the ability to accumulate human capital using the power of test scores to predict earnings growth in the data. We find that if the pre-market distributions were the same for Blacks and Whites, the racial gap in hourly earnings would be closed by 84%, with the remaining gap opening throughout life due to higher labor supply amongst White men. That is, the unequal conditions with which men in the two groups enter the labor market are likely to be the key determinant of the differences over the lifecycle.

We show how to characterize the economic forces that generate the forward guidance puzzle in a wide variety of structural macroeconomic models. We accomplish this by showing that studying the predictions of forward guidance announcements is essentially the same as conducting E-stability analysis under adaptive learning. We show that the Iterative E-stability criterion identifies all of the most prominent forward guidance puzzle resolutions proposed in the literature, provides ways to evaluate their robustness, shows how new resolutions may be constructed, and is scalable to quantitatively relevant models. We show some common resolutions are robust while others are not. We also devise a novel solution to the forward guidance puzzle: sunspots.

The Frisch elasticity of labor supply can be estimated by regressing hours worked on the hourly wage rate, controlling for consumption of the individual worker. However, most household panel surveys contain consumption information only at the household level. We show that proxying individual consumption by household consumption biases estimated Frisch elasticities downward as limited commitment in the household induces individual consumption to behave differently from household consumption. We develop an improved estimation approach that eliminates this bias by exploiting information on the composition of household consumption to infer its distribution. Using PSID data, we estimate Frisch elasticities of about 0.65 for men and 0.8 for women.

This paper considers 1244 estimates of marginal propensities to consume (MPC) out of stimulus checks and other small transitory or predictable payments. The mean quarterly MPC estimate reported by the literature is .35, but estimates vary widely. I use meta-regressions to study sources of this variation. MPC estimates increase with the unemployment rate: at 4% unemployment MPC out of a $1200 stimulus check is about .22, while for unemployment of 8% it is around .4. MPC estimates decrease with the size of the payments. MPCs are lower for households holding ample liquidity. MPCs out of stimulus checks are higher than those out of some recurring payments. These results highlight the importance of considering state-dependent multipliers, liquidity constraints, two-asset models, near rationality, and mental accounting.

We study the spillovers from government intervention in the mortgage market on households' consumption. Expansionary credit policy increases the consumption of homeowners with mortgage debt significantly, while the consumption response of homeowners without mortgage debt is small and insignificant. Non-homeowners also increase their consumption but less than mortgagors. We also find heterogeneous responses of households of different ages. We explain these facts through a life-cycle model with incomplete markets and endogenous housing choice. Downward pressure on the credit and interest rates creates extra wealth for the mortgagors via the refinancing channel.