Review of Economic Dynamics最新文献

We quantitatively analyze the macroeconomic consequences of border delays in Sub-Saharan Africa. Delays of imported intermediate inputs lower aggregate output because of factor misallocation and due to an inefficiently low number of firms that uses foreign inputs in production. Our model economy features heterogeneous firms that endogenously differ in the degree to which foreign inputs are used. The model is calibrated to micro-level data from Sub-Saharan Africa. Reducing border delays can increase aggregate output by up to 9.4%. The gains are mainly due to a reallocation of economic activity towards more productive firms.

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.

We develop a Schumpeterian growth model to analyze the interaction between patent policy and firms' internal strategies to capture value from innovations. We consider two dimensions of patent policy: backward protection against imitation and forward protection, also known as blocking patents, against subsequent innovation that builds on a patented technology. Incumbent patent holders endogenously invest resources to protect their monopoly rents by impeding market entry of innovative competitors. We show that patent policy impacts economic growth through its influence on both the ex ante R&D incentives of potential innovators and the post-innovation rent protection incentives of incumbent firms. Most importantly, our analysis formalizes a novel growth-promoting role of forward protection; by guaranteeing previous innovators a share of future innovators' profits, forward protection reduces the incentive to actively obstruct follow-on innovations. We identify conditions under which the selective use of forward protection can stimulate economic growth through this mechanism.

This paper studies optimal taxes in a lifecycle model with unverifiable human capital investment inseparable from regular consumption. The planner faces asymmetric information regarding agents’ exogenous abilities and endogenous human capital. Agents deviate in two ways: misreporting ability and mis-investing in human capital. We characterize the distortions in a model with i.i.d. shocks and full human capital depreciation. Distortions are characterized by capital wedges that are positive over the life cycle, labor wedges that are negative early and positive later in the life cycle, and net human capital wedges that are positive in the life cycle. These wedges serve as mechanisms to eliminate the distortion to consumption due to inseparability from education expenditure. Calibrate to U.S. data, we show numerically that these results apply in a richer model with persistent shocks and non-full human capital depreciation. Simulation suggests that average capital wedges are positive in all working periods, with progressive capital wedges in contemporary skills, average labor wedges are negative in early and positive in later periods, with hump-shape in skills and nonzero at the top and the bottom of the skill distribution, and net human capital wedges are positive and regressive in skills, indicating that human capital subsidies are in favor of the high skilled.

This paper shows that the evolving likelihood of marriage and divorce is an important factor that helps account for the changes in homeownership rates among young single households and married couples from 1970 to the mid 1990s. To investigate potential mechanisms behind these observed changes, I develop and estimate a life-cycle model that incorporates housing decisions and age-dependent shocks associated with marriage and divorce. The findings indicate that the declined likelihood of marriage, along with increased returns on non-housing assets, helps generate the observed rise in homeownership among singles aged 25-44 years. Conversely, the increased likelihood of divorce, in addition to higher house prices and labor market volatility, contributes to the decrease in homeownership among young couples.

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.

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 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.

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.