Review of Economic Dynamics最新文献

We formalize a decentralized market where consumers with privately-known preferences meet bilaterally with firms. The latter acquire information to raise their degree of price discrimination from second to first. In a dynamic setting where outside options are endogenous, information choices are strategic complements, possibly generating multiple equilibria across which consumers' surpluses and firms' investment in information are negatively correlated. While there exists a sequence of equilibria converging to perfect competition when trading frictions vanish, there exist other equilibria that fail to approach perfect competition. Our findings are robust to firm heterogeneity, entry, noisy signals, and consumers' price-setting power.

Weak financial institutions may affect developing countries due to slowing the much-needed construction process of residential housing. Using novel data collected from Nairobi, I document considerable heterogeneity in the construction duration of new residential buildings, with about 40% of buildings started in 2009 still unfinished in 2018. To understand the role of financial development in constructing residential housing, I develop a heterogeneous agent model with financial frictions in which households construct individual housing units. Counterfactual simulations show that improvements in credit provision can substantially speed up the expansion of the aggregate housing stock and increase the city's density by enabling the construction of taller buildings. The model also predicts that investments in incomplete structures emerge as an alternative savings vehicle in the absence of reliable savings accounts.

The share of births to unmarried women in the U.S. rose well above 30% in the 1990s, despite unmarried women having greater access to abortion and improved birth control. We show that an equilibrium matching model in which unmarried couples behave co-operatively can explain 97% of the rise in the UMB ratio as the response to a combination of well-documented shocks: rising divorce rates, access to abortion, and improved contraception. Equilibrium interactions among these factors are important; had the marital surplus remained constant, very little change in unmarried births would have occurred. We also find that reforms reversing accessibility of birth control or abortion would on their own do little to reverse these social trends.

In this note, we present a formal proof of Obstfeld and Rogoff's (1983, 2021) claim that their fractional-currency-backing scheme eliminates the inflationary equilibria in the money-in-utility model. To do so, we fully articulate the optimization problem of consumers who have the option to redeem (part or all of) their cash for a small amount of goods at any date. We also relate the scheme to the Fiscal Theory of the Price Level.

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.

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.

This paper develops a two-country general equilibrium model with forward-looking participation decisions on exporting and multinational production, and examines the effects of final-goods tariffs and intermediate-input tariffs. I show that permanent unilateral tariffs lead to a recession in the policy-imposed country. In the policy-imposing country, investment experiences a short-run boom while consumption falls immediately and persistently, with intermediate-input tariffs resulting in a larger contraction. At the firm level, the least productive exporters exit from the policy-imposing country, while the most productive ones relocate production there. Relative to a model without multinational firms, this production relocation partially offsets the contractionary effects of tariffs. Crucial to the short-run investment expansion and firms' participation in multinational production in the policy-imposing country is the persistence of tariffs. When tariffs are temporary, investment falls immediately, driving an immediate recession there, in contrast to permanent tariffs. Further, temporary tariffs induce hysteresis in firms' participation in exporting and multinational production, which in turn diminishes the expansionary effects of multinational entry.

This paper shows that utilizing information on the extensive margin of financially constrained households can narrow down the set of admissible preferences in a large class of macroeconomic models. Estimates based on Spanish aggregate data provide further empirical support for this result and suggest that accounting for this margin can bring estimates closer to microeconometric evidence. Accounting for financial constraints and the extensive margin is shown to matter for empirical asset pricing and quantifying distortions in financial markets.

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.