Steven Davis opened the discussion by questioning whether mancessions or shecessions are more socially harmful. He listed some reasons why mancessionsmaybemore harmful, including thatwomen aremore likely to be secondary earners, women have better alternative uses of time (i.e., will spend less nonwork time pursuing sleep or leisure activities), there is a larger psychic cost of male joblessness, andmale joblessness is more associated with increased crime, drug/alcohol use, and physical abuse of spouses/children. The authors responded by saying they are not making a statement on which is worse, but rather they argued that the responses of men and women to job loss are distinct, and this has macroeconomic implications. For example, differences in labor supply flexibility can have aggregate impacts. If a secondary earner (which on average ismore likely to be a woman) loses their job, the primary earner (on average the man) has nomargin for adjustment because they are alreadyworking full-time. In contrast, if a primary earner loses their job, the secondary earner has a margin to adjust and work more. Martin Eichenbaum then followed up this discussion, to ask whether the difference between male and female sensitivity should be interpreted as a market failure, and whether this pattern says anything about efficiency. The authors responded that they do not think this points to any fundamental inefficiency, but the interaction of joint labor supply with policy can certainly create some. For instance, how taxation, unemployment benefits, and retirement entitlements treat secondary versus primary earners could interact with joint labor supply decisions in a way that creates inefficiency.
{"title":"Discussion","authors":"Steven A. Solomon","doi":"10.1086/718663","DOIUrl":"https://doi.org/10.1086/718663","url":null,"abstract":"Steven Davis opened the discussion by questioning whether mancessions or shecessions are more socially harmful. He listed some reasons why mancessionsmaybemore harmful, including thatwomen aremore likely to be secondary earners, women have better alternative uses of time (i.e., will spend less nonwork time pursuing sleep or leisure activities), there is a larger psychic cost of male joblessness, andmale joblessness is more associated with increased crime, drug/alcohol use, and physical abuse of spouses/children. The authors responded by saying they are not making a statement on which is worse, but rather they argued that the responses of men and women to job loss are distinct, and this has macroeconomic implications. For example, differences in labor supply flexibility can have aggregate impacts. If a secondary earner (which on average ismore likely to be a woman) loses their job, the primary earner (on average the man) has nomargin for adjustment because they are alreadyworking full-time. In contrast, if a primary earner loses their job, the secondary earner has a margin to adjust and work more. Martin Eichenbaum then followed up this discussion, to ask whether the difference between male and female sensitivity should be interpreted as a market failure, and whether this pattern says anything about efficiency. The authors responded that they do not think this points to any fundamental inefficiency, but the interaction of joint labor supply with policy can certainly create some. For instance, how taxation, unemployment benefits, and retirement entitlements treat secondary versus primary earners could interact with joint labor supply decisions in a way that creates inefficiency.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"173 - 175"},"PeriodicalIF":7.7,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44351536","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The NBER’s 36th Annual Conference on Macroeconomics brought together leading scholars to present, discuss, and debate five research papers on central issues in contemporary macroeconomics. In addition, we included a panel discussion on the cost associated with expanding the size of government debt. Raghu Rajan moderated the panel, which included CarmenReinhart, RichardReis, andLarry Summers. Given the pandemic, the conference took place via Zoom. Video recordings of the presentations of the papers and the panel discussion are accessible on the web page of the NBER Annual Conference on Macroeconomics. These videos make a useful complement to this volume andmake the conference’s content more widely accessible. This conference volume contains edited versions of the five papers presented at the conference, each followed by two written discussions by leading scholars and a summary of the debates that followed each paper. How the labor market evolves during a recession and its subsequent recovery is a key question inmacroeconomics. During a recession,many workers are displaced from their employers. Over time, these workers are absorbed back into the labor force. So at the onset of a recession, the unemployment rate rises sharply, whereas the unemployment rate falls slowly during the recovery. In their paper “Why Has the US Economy Recovered So Consistently from Every Recession in the Past 70 Years?” Robert Hall and Marianna Kudlyak explore the underpinnings of unemployment dynamics across recessions. Hall and Kudlyak start their paper by documenting a set of
{"title":"Editorial","authors":"Martin Eichenbaum, Erik Hurst","doi":"10.1086/718586","DOIUrl":"https://doi.org/10.1086/718586","url":null,"abstract":"The NBER’s 36th Annual Conference on Macroeconomics brought together leading scholars to present, discuss, and debate five research papers on central issues in contemporary macroeconomics. In addition, we included a panel discussion on the cost associated with expanding the size of government debt. Raghu Rajan moderated the panel, which included CarmenReinhart, RichardReis, andLarry Summers. Given the pandemic, the conference took place via Zoom. Video recordings of the presentations of the papers and the panel discussion are accessible on the web page of the NBER Annual Conference on Macroeconomics. These videos make a useful complement to this volume andmake the conference’s content more widely accessible. This conference volume contains edited versions of the five papers presented at the conference, each followed by two written discussions by leading scholars and a summary of the debates that followed each paper. How the labor market evolves during a recession and its subsequent recovery is a key question inmacroeconomics. During a recession,many workers are displaced from their employers. Over time, these workers are absorbed back into the labor force. So at the onset of a recession, the unemployment rate rises sharply, whereas the unemployment rate falls slowly during the recovery. In their paper “Why Has the US Economy Recovered So Consistently from Every Recession in the Past 70 Years?” Robert Hall and Marianna Kudlyak explore the underpinnings of unemployment dynamics across recessions. Hall and Kudlyak start their paper by documenting a set of","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"xi - xvii"},"PeriodicalIF":7.7,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46577509","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Hall and Kudlyak start with the observation that in the typical US business cycle recovery, unemployment declines slowly but reliably from a high point at the end of a business cycle contraction. They show that the direct effect of job loss at the onset of the recession cannot account for the persistently high unemployment rate during the recovery. The recession’s effects on the labor market go beyond the job losses that mark the beginning of recessions.Hall andKudlyak then exploremodelswhere there is feedback from high unemployment to the forces driving job creation. These mechanisms include higher recruiting costs early in the recovery, congestion in recruitment, externalities from recruitment selection, lower matching efficiency, impaired profitability of new matches, and persistently higher separation rates. These models imply that the recovery of aggregate unemployment is slower than the rate at which individual unemployed workers find new jobs. The paper tackles an interesting and eternal topic. Understanding how the labormarket recovers from recessionary shocks and howfirms recruit and search for workers helps us in shaping policy response to recessionary shocks. This comment reviews and interprets Hall and Kudlyak’s findings and suggests new directions of research.
{"title":"Comment","authors":"Ayşegül Şahi̇n","doi":"10.1086/718656","DOIUrl":"https://doi.org/10.1086/718656","url":null,"abstract":"Hall and Kudlyak start with the observation that in the typical US business cycle recovery, unemployment declines slowly but reliably from a high point at the end of a business cycle contraction. They show that the direct effect of job loss at the onset of the recession cannot account for the persistently high unemployment rate during the recovery. The recession’s effects on the labor market go beyond the job losses that mark the beginning of recessions.Hall andKudlyak then exploremodelswhere there is feedback from high unemployment to the forces driving job creation. These mechanisms include higher recruiting costs early in the recovery, congestion in recruitment, externalities from recruitment selection, lower matching efficiency, impaired profitability of new matches, and persistently higher separation rates. These models imply that the recovery of aggregate unemployment is slower than the rate at which individual unemployed workers find new jobs. The paper tackles an interesting and eternal topic. Understanding how the labormarket recovers from recessionary shocks and howfirms recruit and search for workers helps us in shaping policy response to recessionary shocks. This comment reviews and interprets Hall and Kudlyak’s findings and suggests new directions of research.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"68 - 79"},"PeriodicalIF":7.7,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49051007","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The contribution by Kremer, Willis, and You revisit cross-country convergence patterns over the past 6 decades. They provide evidence that the lack of convergence that applied early in the sample has now been replaced by modest convergence. They also argue this relationship is driven by convergence in various determinants of economic growth across countries and a flattening of the relationship between these determinants and growth. Although the patterns documented by the authors are intriguing, our reanalysis finds that these results are driven by the lack of country fixed effects controlling for unobserved determinants of gross domestic product per capita across countries. We show theoretically and empirically that failure to include country fixed effects will create a bias in convergence coefficients toward zero and this bias can be time varying, even when the underlying country-level parameters are stable. These results are relevant not just for the current paper but also for the convergence literature more generally. Our reanalysis finds no evidence of major changes in patterns of convergence and, more importantly, no flattening of the relationship between institutional variables and economic growth. Focusing on democracy, we show that this variable’s impact continues to be precisely estimated and if anything a little larger than at the beginning of the sample.
{"title":"Comment","authors":"D. Acemoglu, Carlos Molina","doi":"10.1086/718674","DOIUrl":"https://doi.org/10.1086/718674","url":null,"abstract":"The contribution by Kremer, Willis, and You revisit cross-country convergence patterns over the past 6 decades. They provide evidence that the lack of convergence that applied early in the sample has now been replaced by modest convergence. They also argue this relationship is driven by convergence in various determinants of economic growth across countries and a flattening of the relationship between these determinants and growth. Although the patterns documented by the authors are intriguing, our reanalysis finds that these results are driven by the lack of country fixed effects controlling for unobserved determinants of gross domestic product per capita across countries. We show theoretically and empirically that failure to include country fixed effects will create a bias in convergence coefficients toward zero and this bias can be time varying, even when the underlying country-level parameters are stable. These results are relevant not just for the current paper but also for the convergence literature more generally. Our reanalysis finds no evidence of major changes in patterns of convergence and, more importantly, no flattening of the relationship between institutional variables and economic growth. Focusing on democracy, we show that this variable’s impact continues to be precisely estimated and if anything a little larger than at the beginning of the sample.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"425 - 442"},"PeriodicalIF":7.7,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47104565","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Empirical tests in the 1990s found little evidence of poor countries catching up with rich unconditional convergence - since the 1960s, and divergence over longer periods. This stylized fact spurred several developments in growth theory, including AK models, poverty trap models, and the concept of convergence conditional on determinants of steady-state income. We revisit these findings, using the subsequent 25 years as an out-of-sample test, and document a trend towards unconditional convergence since 1990 and convergence since 2000, driven by both faster catch-up growth and slower growth of the frontier. During the same period, many of the correlates of growth - human capital, policies, institutions, and culture - also converged substantially and moved in the direction associated with higher income. Were these changes related? Using the omitted variable bias formula, we decompose the gap between unconditional and conditional convergence as the product of two cross-sectional slopes. First, correlate-income slopes, which remained largely stable since 1990. Second, growth-correlate slopes controlling for income - the coefficients of growth regressions - which remained stable for fundamentals of the Solow model (investment rate, population growth, and human capital) but which flattened substantially for other correlates, leading unconditional convergence to converge towards conditional convergence.
{"title":"Converging to Convergence","authors":"M. Kremer, Jack Willis, Yang You","doi":"10.1086/718672","DOIUrl":"https://doi.org/10.1086/718672","url":null,"abstract":"Empirical tests in the 1990s found little evidence of poor countries catching up with rich unconditional convergence - since the 1960s, and divergence over longer periods. This stylized fact spurred several developments in growth theory, including AK models, poverty trap models, and the concept of convergence conditional on determinants of steady-state income. We revisit these findings, using the subsequent 25 years as an out-of-sample test, and document a trend towards unconditional convergence since 1990 and convergence since 2000, driven by both faster catch-up growth and slower growth of the frontier. During the same period, many of the correlates of growth - human capital, policies, institutions, and culture - also converged substantially and moved in the direction associated with higher income. Were these changes related? Using the omitted variable bias formula, we decompose the gap between unconditional and conditional convergence as the product of two cross-sectional slopes. First, correlate-income slopes, which remained largely stable since 1990. Second, growth-correlate slopes controlling for income - the coefficients of growth regressions - which remained stable for fundamentals of the Solow model (investment rate, population growth, and human capital) but which flattened substantially for other correlates, leading unconditional convergence to converge towards conditional convergence.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"337 - 412"},"PeriodicalIF":7.7,"publicationDate":"2021-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48192759","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The design and conduct of climate change policy necessarily confronts uncertainty along multiple fronts. We explore the consequences of ambiguity over various sources and configurations of models that impact how economic opportunities could be damaged in the future. We appeal to decision theory under risk, model ambiguity and misspecification concerns to provide an economically motivated approach to uncertainty quantification. We show how this approach reduces the many facets of uncertainty into a low dimensional characterization that depends on the uncertainty aversion of a decision-maker or fictitious social planner. In our computations, we take inventory of three alternative channels of uncertainty and provide a novel way to assess them. These include i) carbon dynamics that capture how carbon emissions impact atmospheric carbon in future time periods; ii) temperature dynamics that depict how atmospheric carbon alters temperature in future time periods; iii) damage functions that quantify how temperature changes diminish economic opportunities. We appeal to geoscientific modeling to quantify the first two channels. We show how these uncertainty sources interact for a social planner looking to design a prudent approach to the social pricing of carbon emissions.
{"title":"Climate Change Uncertainty Spillover in the Macroeconomy","authors":"Michael B. Barnett, W. Brock, L. Hansen","doi":"10.1086/718668","DOIUrl":"https://doi.org/10.1086/718668","url":null,"abstract":"The design and conduct of climate change policy necessarily confronts uncertainty along multiple fronts. We explore the consequences of ambiguity over various sources and configurations of models that impact how economic opportunities could be damaged in the future. We appeal to decision theory under risk, model ambiguity and misspecification concerns to provide an economically motivated approach to uncertainty quantification. We show how this approach reduces the many facets of uncertainty into a low dimensional characterization that depends on the uncertainty aversion of a decision-maker or fictitious social planner. In our computations, we take inventory of three alternative channels of uncertainty and provide a novel way to assess them. These include i) carbon dynamics that capture how carbon emissions impact atmospheric carbon in future time periods; ii) temperature dynamics that depict how atmospheric carbon alters temperature in future time periods; iii) damage functions that quantify how temperature changes diminish economic opportunities. We appeal to geoscientific modeling to quantify the first two channels. We show how these uncertainty sources interact for a social planner looking to design a prudent approach to the social pricing of carbon emissions.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"253 - 320"},"PeriodicalIF":7.7,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46249709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Employment rates of males aged 55-64 have changed dramatically in the OECD over the last 5 decades. The average employment rate decreased by more than 15 percentage points between the mid-1970s and the mid-1990s, only to increase by roughly the same amount subsequently. One proposed explanation in the literature is that spousal non-working times are complements and that older males are working longer as a result of secular increases in labor supply of older females. In the first part of this paper we present evidence against this explanation. We then offer a new narrative to understand the employment rate changes for older individuals. We argue that the dramatic U-shaped pattern for older male employment rates should be understood as reflecting a mean reverting low frequency shock to labor market opportunities for all workers in combination with temporary country specific policy responses that incentivized older individuals to withdraw from market work.
{"title":"Shocks, Institutions, and Secular Changes in Employment of Older Individuals","authors":"Richard Rogerson, Johanna Wallenius","doi":"10.1086/718664","DOIUrl":"https://doi.org/10.1086/718664","url":null,"abstract":"Employment rates of males aged 55-64 have changed dramatically in the OECD over the last 5 decades. The average employment rate decreased by more than 15 percentage points between the mid-1970s and the mid-1990s, only to increase by roughly the same amount subsequently. One proposed explanation in the literature is that spousal non-working times are complements and that older males are working longer as a result of secular increases in labor supply of older females. In the first part of this paper we present evidence against this explanation. We then offer a new narrative to understand the employment rate changes for older individuals. We argue that the dramatic U-shaped pattern for older male employment rates should be understood as reflecting a mean reverting low frequency shock to labor market opportunities for all workers in combination with temporary country specific policy responses that incentivized older individuals to withdraw from market work.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"177 - 216"},"PeriodicalIF":7.7,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48622958","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
T. Alon, Sena Coskun, Matthias Doepke, David Koll, M. Tertilt
We examine the impact of the global recession triggered by the Covid-19 pandemic on women's versus men's employment. Whereas recent recessions in advanced economies usually had a disproportionate impact on men's employment, giving rise to the moniker "mancessions," we show that the pandemic recession of 2020 was a "shecession" in most countries with larger employment declines among women. We examine the causes behind this pattern using micro data from several national labor force surveys, and show that both the composition of women's employment across industries and occupations as well as increased childcare needs during closures of schools and daycare centers made important contributions. While many countries exhibit similar patterns, we also emphasize how policy choices such as furloughing policies and the extent of school closures shape the pandemic's impact on the labor market. Another notable finding is the central role of telecommuting: gender gaps in the employment impact of the pandemic arise almost entirely among workers who are unable to work from home. Nevertheless, among telecommuters a different kind of gender gap arises: women working from home during the pandemic spent more work time also doing childcare and experienced greater productivity reductions than men. We discuss what our findings imply for gender equality in a post-pandemic labor market that will likely continue to be characterized by pervasive telecommuting.
{"title":"From Mancession to Shecession: Women’s Employment in Regular and Pandemic Recessions","authors":"T. Alon, Sena Coskun, Matthias Doepke, David Koll, M. Tertilt","doi":"10.1086/718660","DOIUrl":"https://doi.org/10.1086/718660","url":null,"abstract":"We examine the impact of the global recession triggered by the Covid-19 pandemic on women's versus men's employment. Whereas recent recessions in advanced economies usually had a disproportionate impact on men's employment, giving rise to the moniker \"mancessions,\" we show that the pandemic recession of 2020 was a \"shecession\" in most countries with larger employment declines among women. We examine the causes behind this pattern using micro data from several national labor force surveys, and show that both the composition of women's employment across industries and occupations as well as increased childcare needs during closures of schools and daycare centers made important contributions. While many countries exhibit similar patterns, we also emphasize how policy choices such as furloughing policies and the extent of school closures shape the pandemic's impact on the labor market. Another notable finding is the central role of telecommuting: gender gaps in the employment impact of the pandemic arise almost entirely among workers who are unable to work from home. Nevertheless, among telecommuters a different kind of gender gap arises: women working from home during the pandemic spent more work time also doing childcare and experienced greater productivity reductions than men. We discuss what our findings imply for gender equality in a post-pandemic labor market that will likely continue to be characterized by pervasive telecommuting.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"36 1","pages":"83 - 151"},"PeriodicalIF":7.7,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49228195","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Reparations is a policy proposal aiming to address the wealth gap between Black and White households. We provide a first formal analysis of the economics of reparations using a long-run model of heterogeneous dynasties with an occupational choice and bequests. Our innovation is to introduce endogenous dispersion of beliefs about risky returns, reflecting differences in dynasties' experiences with entrepreneurship over time. Feeding the exclusion of Black dynasties from labor and capital markets as driving force, the model quantitatively reproduces current and historical racial gaps in wealth, income, entrepreneurship, mobility, and beliefs about risky returns. We use the model to evaluate reparations and find that transfers eliminating the racial gap in average wealth today do not lead to wealth convergence in the long run. The logic is that century-long exclusions lead Black dynasties to enter into reparations with pessimistic beliefs about risky returns and to forego investment opportunities. We conclude by showing that entrepreneurial subsidies are more effective than wealth transfers in achieving racial wealth convergence in the long run.
{"title":"Reparations and Persistent Racial Wealth Gaps","authors":"J. Boerma, Loukas Karabarbounis","doi":"10.1086/723578","DOIUrl":"https://doi.org/10.1086/723578","url":null,"abstract":"Reparations is a policy proposal aiming to address the wealth gap between Black and White households. We provide a first formal analysis of the economics of reparations using a long-run model of heterogeneous dynasties with an occupational choice and bequests. Our innovation is to introduce endogenous dispersion of beliefs about risky returns, reflecting differences in dynasties' experiences with entrepreneurship over time. Feeding the exclusion of Black dynasties from labor and capital markets as driving force, the model quantitatively reproduces current and historical racial gaps in wealth, income, entrepreneurship, mobility, and beliefs about risky returns. We use the model to evaluate reparations and find that transfers eliminating the racial gap in average wealth today do not lead to wealth convergence in the long run. The logic is that century-long exclusions lead Black dynasties to enter into reparations with pessimistic beliefs about risky returns and to forego investment opportunities. We conclude by showing that entrepreneurial subsidies are more effective than wealth transfers in achieving racial wealth convergence in the long run.","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"37 1","pages":"171 - 221"},"PeriodicalIF":7.7,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44383276","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Greg Kaplan opened the general discussion with a remark about asset return heterogeneity. In the authors’ model, a sufficient degree of dispersion in asset returns guarantees a well-defined equilibriumwealth distribution. Removing asset return heterogeneity would not imply a counterfactually low degree of wealth inequality but rather a degenerate wealth distribution with a mass point at infinity, he said. The authors clarified that their model is able to generate a Pareto tail in the wealth distribution by adding capital return heterogeneity to a standard S. R. Aiyagari (“Uninsured Idiosyncratic Risk and Aggregate Saving,” Quarterly Journal of Economics 109, no. 3 [1994]: 659–84) model with labor income inequality. In their calibration, the mean asset return is below the discount rate, but introducing sufficient dispersion in asset returns allows the model to generate the Pareto tail in the wealth distribution observed in the data, they argued. The rest of the discussion focused on a single topic: the importance of modeling the tax system and measuring the effective tax rate correctly. Frederic Mishkin noted that the effective tax rate can be influenced by tax avoidance. Actual tax collection from highmarginal-income tax brackets in the 1960s and 1970s, for example, was likely impaired due to widespread avoidance, he argued. The authors agreed that accounting for tax avoidance is crucial. They emphasized that their paper employs estimates of the effective tax rate from T. Piketty and E. Saez (“How Progressive Is the US Federal Tax System?AHistorical and International Perspective,” Journal of Economic Perspectives 21, no. 1 [2007]: 3–24), which takes care of this issue. James Poterba offered two comments related to the measurement of the effective tax rate on capital income. Such estimates are typically low, Poterba argued, because of two features of the US tax system: the deferral
{"title":"Discussion","authors":"","doi":"10.1086/712335","DOIUrl":"https://doi.org/10.1086/712335","url":null,"abstract":"Greg Kaplan opened the general discussion with a remark about asset return heterogeneity. In the authors’ model, a sufficient degree of dispersion in asset returns guarantees a well-defined equilibriumwealth distribution. Removing asset return heterogeneity would not imply a counterfactually low degree of wealth inequality but rather a degenerate wealth distribution with a mass point at infinity, he said. The authors clarified that their model is able to generate a Pareto tail in the wealth distribution by adding capital return heterogeneity to a standard S. R. Aiyagari (“Uninsured Idiosyncratic Risk and Aggregate Saving,” Quarterly Journal of Economics 109, no. 3 [1994]: 659–84) model with labor income inequality. In their calibration, the mean asset return is below the discount rate, but introducing sufficient dispersion in asset returns allows the model to generate the Pareto tail in the wealth distribution observed in the data, they argued. The rest of the discussion focused on a single topic: the importance of modeling the tax system and measuring the effective tax rate correctly. Frederic Mishkin noted that the effective tax rate can be influenced by tax avoidance. Actual tax collection from highmarginal-income tax brackets in the 1960s and 1970s, for example, was likely impaired due to widespread avoidance, he argued. The authors agreed that accounting for tax avoidance is crucial. They emphasized that their paper employs estimates of the effective tax rate from T. Piketty and E. Saez (“How Progressive Is the US Federal Tax System?AHistorical and International Perspective,” Journal of Economic Perspectives 21, no. 1 [2007]: 3–24), which takes care of this issue. James Poterba offered two comments related to the measurement of the effective tax rate on capital income. Such estimates are typically low, Poterba argued, because of two features of the US tax system: the deferral","PeriodicalId":51680,"journal":{"name":"Nber Macroeconomics Annual","volume":"35 1","pages":"480 - 481"},"PeriodicalIF":7.7,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1086/712335","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48297496","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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