Risultati della ricerca
Creator: Guvenen, Fatih and Kuruscu, Burhanettin Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 427 Abstract:
In this paper, we construct a parsimonious overlapping-generations model of human capital accumulation and study its quantitative implications for the evolution of the U.S. wage distribution from 1970 to 2000. A key feature of the model is that individuals differ in their ability to accumulate human capital, which is the main source of wage inequality in this model. We examine the response of this model to skill-biased technical change (SBTC), which is modeled as an increase in the trend growth rate of the price of human capital starting in the early 1970s. The model displays behavior that is consistent with several important trends observed in the US data, including the rise in overall wage inequality; the fall and subsequent rise in the college premium, as well as the fact that this behavior was most pronounced for younger workers; the rise in within-group inequality; the stagnation in median wage growth; and the small rise in consumption inequality despite the large rise in wage inequality. We consider different scenarios regarding how individuals’ expectations evolve during SBTC. Specifically, we study the case where individuals immediately realize the advent of SBTC (perfect foresight), and the case where they initially underestimate the future growth of the price of human capital (pessimistic priors), but learn the truth in a Bayesian fashion over time. Lack of perfect foresight appears to have little effect on the main results of the paper. Overall, the model shows promise for explaining a diverse set of wage distribution trends observed since the 1970s in a unifying human capital framework.
Soggetto: J31 - Wage Level and Structure; Wage Differentials, E25 - Aggregate Factor Income Distribution, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, and E21 - Macroeconomics: Consumption; Saving; Wealth
Creator: Kehoe, Patrick J., Midrigan, Virgiliu, and Pastorino, Elena Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 536 Abstract:
During the Great Recession, regions of the United States that experienced the largest declines in household debt also experienced the largest drops in consumption, employment, and wages. Employment declines were larger in the nontradable sector and for firms that were facing the worst credit conditions. Motivated by these findings, we develop a search and matching model with credit frictions that affect both consumers and firms. In the model, tighter debt constraints raise the cost of investing in new job vacancies and thus reduce worker job finding rates and employment. Two key features of our model, on-the-job human capital accumulation and consumer-side credit frictions, are critical to generating sizable drops in employment. On-the-job human capital accumulation makes the flows of benefits from posting vacancies long-lived and so greatly amplifies the sensitivity of such investments to credit frictions. Consumer-side credit frictions further magnify these effects by leading wages to fall only modestly. We show that the model reproduces well the salient cross-regional features of the U.S. data during the Great Recession.
Parola chiave: Employment, Debt constraints, Search and matching, and Human capital Soggetto: E32 - Business Fluctuations; Cycles, E21 - Macroeconomics: Consumption; Saving; Wealth, J64 - Unemployment: Models, Duration, Incidence, and Job Search, J21 - Labor Force and Employment, Size, and Structure, and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Creator: Ohanian, Lee E., Restrepo-Echavarria, Paulina, and Wright, Mark L. J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 563 Abstract:
After World War II, international capital flowed into slow-growing Latin America rather than fast-growing Asia. This is surprising as, everything else equal, fast growth should imply high capital returns. This paper develops a capital flow accounting framework to quantify the role of different factor market distortions in producing these patterns. Surprisingly, we find that distortions in labor markets — rather than domestic or international capital markets — account for the bulk of these flows. Labor market distortions that indirectly depress investment incentives by lowering equilibrium labor supply explain two-thirds of observed flows, while improvement in these distortions over time accounts for much of Asia’s rapid growth.
Parola chiave: International capital markets, Domestic capital markets, Capital flows, and Labor markets Soggetto: J20 - Demand and Supply of Labor: General, E21 - Macroeconomics: Consumption; Saving; Wealth, F41 - Open Economy Macroeconomics, and F21 - International Investment; Long-term Capital Movements
Creator: Kehoe, Patrick J. and Perri, Fabrizio Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 307 Abstract:
We show how to decentralize constrained efficient allocations that arise from enforcement constraints between sovereign nations. In a pure exchange economy, these allocations can be decentralized with private agents acting competitively and taking as given government default decisions on foreign debt. In an economy with capital, these allocations can be decentralized if the government can tax capital income as well as default on foreign debt. The tax on capital income is needed to make private agents internalize a subtle externality. The decisions of the government can arise as an equilibrium of a dynamic game between governments.
Parola chiave: Decentralization, Default, Sustainable equilibrium, Incomplete markets, Sovereign debt, Risk-sharing, and Enforcement constraints Soggetto: E32 - Business Fluctuations; Cycles, F34 - International Lending and Debt Problems, E21 - Macroeconomics: Consumption; Saving; Wealth, D50 - General Equilibrium and Disequilibrium: General, F30 - International Finance: General, and E44 - Financial Markets and the Macroeconomy
Creator: Cagetti, Marco and De Nardi, Mariacristina Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 322 Abstract:
Although the role of financial constraints on entrepreneurial choices has received considerable attention, the effects of these constraints on aggregate capital accumulation and wealth inequality are less known. Entrepreneurship is an important determinant of capital accumulation and wealth concentration and, conversely, the distribution of wealth affects entrepreneurial choices in the presence of borrowing constraints. We construct a model that matches wealth inequality very well, for both entrepreneurs and non-entrepreneurs, and find that more restrictive borrowing constraints generate less wealth concentration, but also reduce average firm size, aggregate capital, and the fraction of entrepreneurs. We also find that voluntary bequests are an important channel that allows some high-ability workers to establish or enlarge an entrepreneurial activity: with accidental bequests only, there would be fewer large firms, fewer entrepreneurs, and less aggregate capital, but also less wealth concentration.
Parola chiave: Borrowing constraints, Inequality, Entrepreneurship, and Wealth Soggetto: H32 - Fiscal Policies and Behavior of Economic Agents: Firm, E21 - Macroeconomics: Consumption; Saving; Wealth, H20 - Taxation, Subsidies, and Revenue: General, and E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Creator: Cagetti, Marco and De Nardi, Mariacristina Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 340 Abstract:
Entrepreneurship is a key determinant of investment, saving, and wealth inequality. We study the aggregate and distributional effects of several tax reforms in a model that recognizes this key role and that matches the large wealth inequality observed in the U.S. data. The aggregate effects of tax reforms can be particularly large when they affect small and medium-sized businesses, which face the most severe financial constraints, rather than big businesses. The consequences of changes in the estate tax depend heavily on the size of its exemption level. The current effective estate tax system insulates smaller businesses from the negative effects of estate taxation, minimizing the aggregate costs of redistribution. Abolishing the current estate tax would generate a modest increase in wealth inequality and slightly reduce aggregate output. Decreasing the progressivity of the income tax generates large increases in output, at the cost of large increases in wealth concentration.
Parola chiave: Entrepreneurship, Wealth, and Taxation Soggetto: D91 - Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making, E21 - Macroeconomics: Consumption; Saving; Wealth, and H20 - Taxation, Subsidies, and Revenue: General
Creator: Krueger, Dirk and Perri, Fabrizio Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 363 Abstract:
Using data from the Consumer Expenditure Survey, we first document that the recent increase in income inequality in the United States has not been accompanied by a corresponding rise in consumption inequality. Much of this divergence is due to different trends in within-group inequality, which has increased significantly for income but little for consumption. We then develop a simple framework that allows us to analytically characterize how within-group income inequality affects consumption inequality in a world in which agents can trade a full set of contingent consumption claims, subject to endogenous constraints emanating from the limited enforcement of intertemporal contracts (as in Kehoe and Levine, 1993). Finally, we quantitatively evaluate, in the context of a calibrated general equilibrium production economy, whether this setup, or alternatively a standard incomplete markets model (as in Aiyagari, 1994), can account for the documented stylized consumption inequality facts from the U.S. data.
Parola chiave: Limited Enforcement, Risk Sharing, and Consumption Inequality Soggetto: G22 - Insurance; Insurance Companies; Actuarial Studies, D91 - Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making, E21 - Macroeconomics: Consumption; Saving; Wealth, D31 - Personal Income, Wealth, and Their Distributions, and D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
Creator: Huang, Kevin X. D., Liu, Zheng, and Zhu, Qi Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 367 Abstract:
This paper studies the empirical relevance of temptation and self-control using household-level data from the Consumer Expenditure Survey. We estimate an infinite-horizon consumption-savings model that allows, but does not require, temptation and self-control in preferences. To help identify the presence of temptation, we exploit an implication of the theory that a tempted individual has a preference for commitment. In the presence of temptation, the cross-sectional distribution of the wealth-consumption ratio, in addition to that of consumption growth, becomes a determinant of the asset-pricing kernel, and the importance of this additional pricing factor depends on the strength of temptation. The estimates that we obtain provide statistical evidence supporting the presence of temptation. Based on our estimates, we explore some quantitative implications of this class of preferences on equity premium and on the welfare cost of business cycles.
Parola chiave: Consumption, Intertemporal decision, Temptation, Self-control, and Limited participation Soggetto: D91 - Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making and E21 - Macroeconomics: Consumption; Saving; Wealth
Creator: Kocherlakota, Narayana Rao, 1963- and Pistaferri, Luigi Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 372 Abstract:
Typical incomplete markets models in international economics make two assumptions. First, households are not able to fully insure themselves against country-specific shocks. Second, there is a representative household within each country, so that households are fully insured against idiosyncratic shocks. We assume instead that cross-household risk-sharing is limited within countries, but cross-country risk-sharing is complete. We consider two types of limited risk-sharing: domestically incomplete markets (DI) and private information-Pareto optimal (PIPO) risk-sharing. We show that the models imply distinct restrictions between the cross-sectional distributions of consumption and real exchange rates. We evaluate these restrictions using household-level consumption data from the United States and the United Kingdom. We show that the PIPO restriction fits the data well when households have a coefficient of relative risk aversion of around 5. The analogous restrictions implied by the representative agent model and the DI model are rejected at conventional levels of significance.
Parola chiave: Market incompleteness, Precautionary savings, Real exchange rate, and Pareto optimality Soggetto: E21 - Macroeconomics: Consumption; Saving; Wealth, F31 - Foreign Exchange, and D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
Creator: Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 379 Abstract:
The common approach to evaluating a model in the structural VAR literature is to compare the impulse responses from structural VARs run on the data to the theoretical impulse responses from the model. The Sims-Cogley-Nason approach instead compares the structural VARs run on the data to identical structural VARs run on data from the model of the same length as the actual data. Chari, Kehoe, and McGrattan (2006) argue that the inappropriate comparison made by the common approach is the root of the problems in the SVAR literature. In practice, the problems can be solved simply. Switching from the common approach to the Sims-Cogley-Nason ap-proach basically involves changing a few lines of computer code and a few lines of text. This switch will vastly increase the value of the structural VAR literature for economic theory.
Soggetto: E27 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and Applications, E32 - Business Fluctuations; Cycles, C51 - Model Construction and Estimation, E21 - Macroeconomics: Consumption; Saving; Wealth, E13 - General Aggregative Models: Neoclassical, E37 - Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications, C52 - Model Evaluation, Validation, and Selection, C32 - Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models, and E17 - General Aggregative Models: Forecasting and Simulation: Models and Applications