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Creator: Cole, Harold Linh, 1957- and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 524 Mot-clé: Consumption and General equilibrium Assujettir: D50 - General Equilibrium and Disequilibrium: General
Creator: Hansen, Gary D. (Gary Duane) and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 507 La description:
Presented at the ASSA meetings in Anaheim, CA.
Mot-clé: 1991, Recession, Technology shock, Labor, 1990, Productivity, Knowledge, and Technological shocks Assujettir: G14 - Information and Market Efficiency; Event Studies; Insider Trading and O33 - Technological Change: Choices and Consequences; Diffusion Processes
Creator: Blandin, Adam, Boyd, John H., and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 717 Abstract:
We develop an equilibrium concept in the Debreu (1954) theory of value tradition for a class of adverse selection economies which includes the Spence (1973) signaling and Rothschild-Stiglitz (1976) insurance environments. The equilibrium exists and is optimal. Further, all equilibria have the same individual type utility vector. The economies are large with a finite number of types that maximize expected utility on an underlying commodity space. An implication of the analysis is that the invisible hand works for this class of adverse selection economies.
Mot-clé: Insurance, Mutual organization, Adverse selection equilibrium, Theory of value, The core, and Signaling Assujettir: G22 - Insurance; Insurance Companies; Actuarial Studies, C62 - Existence and Stability Conditions of Equilibrium, G29 - Financial Institutions and Services: Other, D46 - Value Theory, and D82 - Asymmetric and Private Information; Mechanism Design
Creator: McGrattan, Ellen R. and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 694 Abstract:
Prior to the mid-1980s, labor productivity growth was a useful barometer of the U.S. economy’s performance: it was low when the economy was depressed and high when it was booming. Since then, labor productivity has become significantly less procyclical. In the recent downturn of 2008–2009, labor productivity actually rose as GDP plummeted. These facts have motivated the development of new business cycle theories because the conventional view is that they are inconsistent with existing business cycle theory. In this paper, we analyze recent events with existing theory and find that the labor productivity puzzle is much less of a puzzle than previously thought. In light of these findings, we argue that policy agendas arising from new untested theories should be disregarded.
Mot-clé: Intangible capital, Nonneutral technology change, Labor productivity, Labor wedge, and RBC models Assujettir: E01 - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts, E13 - General Aggregative Models: Neoclassical, and E32 - Business Fluctuations; Cycles
Creator: Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 692 Abstract:
A problem facing the United States and many other countries is how to finance retirement consumption as the number of their workers per retiree falls. The problem with a savings for retirement systems is that there is a shortage of good savings opportunities given the nature of most current tax systems and governments’ limited ability to honor the debt it issues. We find that eliminating capital income taxes will greatly increase saving opportunities and make a savings-for-retirement system feasible with only modest amount of government debt. The switch from a system close to the current U.S. retirement system, which relies heavily on taxing workers’ incomes and making lump-sum transfers to retirees, to one without income taxes will increase the welfare of all birth-year cohorts alive today and particularly the welfare of the yet unborn cohorts. The equilibrium paths for the current and alternative policies are computed.
Mot-clé: Government debt, Tax systems, Efficient taxation, and Quantitative OLG Assujettir: G18 - General Financial Markets: Government Policy and Regulation, G00 - Financial Economics: General, E20 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data), H21 - Taxation and Subsidies: Efficiency; Optimal Taxation, and H61 - National Budget; Budget Systems
Creator: Holmes, Thomas J., McGrattan, Ellen R., and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 687 Abstract:
It is widely believed that an important factor underlying the rapid growth in China is increased foreign direct investment (FDI) and the transfer of foreign technology capital, which is accumulated know-how from investment in research and development (R&D), brands, and organizations that is not specific to a plant. In this paper, we study two channels through which FDI can contribute to upgrading of the stock of technology capital: knowledge spillovers and appropriation. Knowledge spillovers lead to new ideas that do not directly compete or devalue the foreign affiliate's stock. Appropriation, on the other hand, implies a redistribution of property rights over patents and trademarks; the gain to domestic companies comes at a loss to the multinational company (MNC). In this paper we build these sources of technology capital transfer into the framework developed by McGrattan and Prescott (2009, 2010) and introduce an endogenously-chosen intensity margin for operating technology capital in order to capture the trade-offs MNCs face when expanding their markets internationally. We first demonstrate that abstracting from technology capital transfers results in predicted bilateral FDI inflows to China that are grossly at odds with the data. We then use the bilateral inflows to parameterize the model with technology capital transfers and compute the global economic impact of Chinese policies that encouraged greater inflows of FDI and technology capital transfers. Microevidence on automobile patents is used to support our parameter choices and main findings.
Assujettir: O33 - Technological Change: Choices and Consequences; Diffusion Processes, F41 - Open Economy Macroeconomics, F23 - Multinational Firms; International Business, and O34 - Intellectual Property and Intellectual Capital
Creator: McGrattan, Ellen R. and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 651 Abstract:
A framework is developed with what we call technology capital. A country is a measure of locations. Absent policy constraints, a firm owning a unit of technology capital can produce the composite output good using the unit of technology capital at as many locations as it chooses. But it can operate only one operation at a given location, so the number of locations is what constrains the number of units it operates using this unit of technology capital. If it has two units of technology capital, it can operate twice as many operations at every location. In this paper, aggregation is carried out and the aggregate production functions for the countries are derived. Our framework interacts well with the national accounts in the same way as does the neoclassical growth model. It also interacts well with the international accounts. There are constant returns to scale, and therefore no monopoly rents. Yet there are gains to being economically integrated. In the framework, a country’s openness is measured by the effect of its policies on the productivity of foreign operations. Our analysis indicates that there are large gains to this openness.
Mot-clé: Foreign direct investment and Openness Assujettir: F23 - Multinational Firms; International Business, F43 - Economic Growth of Open Economies, and O11 - Macroeconomic Analyses of Economic Development
Creator: Birkeland, Kathryn and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 648 Abstract:
People are having longer retirement periods, and population growth is slowing and has even stopped in some countries. In this paper we determined the implications of these changes for the needed amount of government debt. The needed debt is near zero if there are high tax rates and the transfer share of gross national income (GNI) is high. But, with such a system there are huge dead-weight losses as the result of the high tax rate on labor income. With a savings system, a large government debt to annual GNI ratio is needed, as large as 5 times GNI, and welfare is as much as 24 percent higher in terms of lifetime consumption equivalents than the tax-and-transfer system.