Research Database

Suppose firms are subject to decreasing returns and permanent idiosyncratic productivity shocks. Suppose also firms can only stay in business by continuously paying a fixed cost. New firms can enter. Firms with a history of relatively good productivity shocks tend to survive and others are forced to exit. This paper identifies assumptions about entry that guarantee a stationary firm size distribution and lead to balanced growth. The range of technology diffusion mechanisms that can be considered is greatly expanded relative to previous work. High entry costs slow down the selection process and imply slow aggregate growth. They also push the firm size distribution in the direction of Zipf’s law.

The possibility of regime shifts in monetary policy can have important effects on rational agents’ expectation formation and equilibrium dynamics. In a DSGE model where the monetary policy rule switches between a dovish regime that accommodates inflation and a hawkish regime that stabilizes inflation, the expectation effect is asymmetric across regimes. Such an asymmetric effect makes it difficult, but still possible, to generate substantial reductions in the volatilities of inflation and output as the monetary policy switches from the dovish regime to the hawkish regime.

We analyze changes in the gender structure at the top of the earnings distribution in the United States over the last 30 years using a 10% sample of individual earnings histories from the Social Security Administration. Despite making large inroads, females still constitute a small proportion of the top percentiles: the glass ceiling, albeit a thinner one, remains. We measure the contribution of changes in labor force participation, changes in the persistence of top earnings, and changes in industry and age composition to the change in the gender composition of top earners. A large proportion of the increased share of females among top earners is accounted for by the mending of, what we refer to as, the paper floor – the phenomenon whereby female top earners were much more likely than male top earners to drop out of the top percentiles. We also provide new evidence at the top of the earnings distribution for both genders: the rising share of top earnings accruing to workers in the Finance and Insurance industry, the relative transitory status of top earners, the emergence of top earnings gender gaps over the life cycle, and gender differences among lifetime top earners.

This study examines common stock prices around ex-dividend dates. Such price data usually contain a mixture of observations—some with and some without arbitrageurs and/or dividend capturers active. Our theory predicts that such mixing will result in a nonlinear relation between percentage price drop and dividend yield—not the commonly assumed linear relation. This prediction and another important prediction of theory are supported empirically. In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop has been an excellent (average) rule of thumb.

Thinking regarding the privatization of state industries and enterprises in the former Comecon countries has tended to focus on the efficiency gains that would occur in the privatized sector. Based on the comparatively good performance and the rather rigid configuration of Comecon production institutions, the scope for such productivity gains seems small. Rather, productivity and innovation in the post-Comecon economies are likely to depend greatly on the emergence of new, initially small, entrepreneurial firms. The extent and form of privatization may affect these firms' prospects for success. How the privatized-firm and entrepreneurial sector will interact depends on public-finance considerations as well as on considerations of industrial organization.