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Creator: Boerma, Job and Karabarbounis, Loukas Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 746 Abstract:
We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and home production. Accounting for home production amplifies welfare-based differences across households meaning that inequality is larger than we thought. Home production does not offset differences that originate in the market sector because productivity differences in the home sector are significant and the time input in home production does not covary with consumption expenditures and wages in the cross section of households. The optimal tax system should feature more progressivity taking into account home production.
Palabra clave: Inequality, Labor supply, Home production, and Consumption Tema: D10 - Household Behavior: General, J22 - Time Allocation and Labor Supply, E21 - Macroeconomics: Consumption; Saving; Wealth, and D60 - Welfare Economics: General
Creator: Boerma, Job and Karabarbounis, Loukas Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 763 Abstract:
During the past two decades, households experienced increases in their average wages and expenditures alongside with divergent trends in their wages, expenditures, and time allocation. We develop a model with incomplete asset markets and household heterogeneity in market and home technologies and preferences to account for these labor market trends and assess their welfare consequences. Using micro data on expenditures and time use, we identify the sources of heterogeneity across households, document how these sources have changed over time, and perform counterfactual analyses. Given the observed increase in leisure expenditures relative to leisure time and the complementarity of these inputs in leisure technology, we infer a significant increase in the average productivity of time spent on leisure. The increasing productivity of leisure time generates significant welfare gains for the average household and moderates negative welfare effects from the rising dispersion of expenditures and time allocation across households.
Palabra clave: Leisure productivity, Inequality, Consumption, and Time use Tema: J22 - Time Allocation and Labor Supply, D10 - Household Behavior: General, D60 - Welfare Economics: General, and E21 - Macroeconomics: Consumption; Saving; Wealth
Creator: Chari, V. V. and Jones, Larry E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 142 Abstract:
We examine the validity of one version of the Coase Theorem: In any economy in which property rights are fully allocated, competition will lead to efficient allocations. This version of the theorem implies that the public goods problem can be solved by allocating property rights fully and letting markets do their work. We show that this mechanism is not likely to work well in economies with either pure public goods or global externalities. The reason is that the privatized economy turns out to be highly susceptible to strategic behavior in that the free-rider problem in public goods economies manifests itself as a complementary monopoly problem in the private goods economy. If the public goods or externalities are local in nature, however, market mechanisms are likely to work well.
Our work is related to the recent literature on the foundations of Walrasian equilibrium in that it highlights a relationship among the appropriateness of Walrasian equilibrium as a solution concept, the incentives for strategic play, the aggregate level of complementarities in the economy, and the problem of coordinating economic activity.
Palabra clave: Externalities, Public goods, Complementary monopoly, and Free-rider problem Tema: H40 - Publicly Provided Goods: General, D50 - General Equilibrium and Disequilibrium: General, and D60 - Welfare Economics: General