Research Database

This paper posits an information channel as the explanation for sudden inflations. Consumers saving via nominal government bonds face a choice whether to acquire costly information about future government surpluses. They trade off the cost of acquiring information about the surpluses that back bond repayment against the benefit of a more informed saving decision. Through the information channel, small changes in the economic environment can trigger large responses in consumers' behavior and prices. This setting explains why there can be long stretches of time during which government surpluses have large movements with little inflation response; yet, at some point, something snaps, and a sudden inflation takes off that is strongly responsive to incoming fiscal news.

How should countries cooperate in setting fiscal and trade policies when government expenditures must be financed with distorting taxes? We show that even if countries cannot make explicit transfers to each other, every point on the Pareto frontier is production efficient, so that international trade and capital flows should be effectively free. Trade agreements must be supplemented with fiscal policy agreements. Residence-based income tax systems have advantages over source-based systems. Taxing all household asset income at a country-specific uniform rate and setting the corporate income tax to zero yield efficient outcomes. Value-added taxes should be adjusted at the border.

Between 1880 and 1920, the US agricultural employment share fell from 50% to 25%. However, despite aggregate demand shifting away from their sector of specialization, rural labor markets saw faster wage growth and industrialization than non-agricultural parts of the US. We propose a spatial model of the structural transformation to analyze the link between aggregate structural change and local economic development. The calibrated model shows that rural areas adapted to the decline of the agricultural sector by adopting technologies already in use in urban locations. Without such catchup growth, economic development would have been urban-biased and spatial inequality would have increased.

There have been growing concerns about long-haulers or individuals with long-term COVID-19 health complications (long-haul COVID). While the medical field has been investigating the health complications, there has been limited research on the relationship between long-haul COVID and labor market outcomes. To investigate this relationship, I used the University of Southern California Understanding America Study COVID-19 longitudinal survey to provide a snapshot of mid-2021. I first find about 24.1% of individuals who have had COVID are long-haulers and 25.9% of long-haulers reported that their long-haul COVID affected employment or work hours. I then find that a majority of these affected long-haulers remained employed and in same employment type. But I find that their mean change in work hours and paycheck declined. Afterwards, I tested whether long-haul COVID is associated with negative changes in labor market outcomes. When I combined long-haulers who reported that their health complications did or did not affect work, I failed to find that long-haulers are less likely to be employed relative to individuals without prior COVID infection. But, when I discern long-haulers by whether long-haul COVID affected work, I find that long-haulers who reported long-haul COVID affected work are 10 percentage points less likely to be employed and, on average, work 50% fewer hours than individuals without prior COVID infection. In contrast, I failed to find evidence that affected long-haulers receive a lower paycheck earning relative to individuals without prior COVID infection. Lastly, when comparing these affected long-haulers against similar individuals, I find evidence that they are more impacted in their employed status and work hours. Due to limitations, future data collection and research would provide a more robust picture.