Creator: Geweke, John Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 249 Abstract:
This paper surveys the fundamental principles of subjective Bayesian inference in econometrics and the implementation of those principles using posterior simulation methods. The emphasis is on the combination of models and the development of predictive distributions. Moving beyond conditioning on a fixed number of completely specified models, the paper introduces subjective Bayesian tools for formal comparison of these models with as yet incompletely specified models. The paper then shows how posterior simulators can facilitate communication between investigators (for example, econometricians) on the one hand and remote clients (for example, decision makers) on the other, enabling clients to vary the prior distributions and functions of interest employed by investigators. A theme of the paper is the practicality of subjective Bayesian methods. To this end, the paper describes publicly available software for Bayesian inference, model development, and communication and provides illustrations using two simple econometric models.
Creator: Chen, Daphne, Guvenen, Fatih, Kambourov, Gueorgui, Kuruscu, Burhanettin, and Ocampo, Sergio Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 764 Abstract:
How does wealth taxation differ from capital income taxation? When the return on investment is equal across individuals, a well-known result is that the two tax systems are equivalent. Motivated by recent empirical evidence documenting persistent heterogeneity in rates of return across individuals, we revisit this question. With such heterogeneity, the two tax systems have opposite implications for both efficiency and inequality. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the tax base, shifts the tax burden toward unproductive entrepreneurs, and raises the savings rate of productive ones. This reallocation increases aggregate productivity and output. In the simulated model parameterized to match the US data, replacing the capital income tax with a wealth tax in a revenue-neutral fashion delivers a significantly higher average lifetime utility to a newborn (about 7.5% in consumption-equivalent terms). Turning to optimal taxation, the optimal wealth tax (OWT) in a stationary equilibrium is positive and yields even larger welfare gains. In contrast, the optimal capital income tax (OCIT) is negative—a subsidy—and large, and it delivers lower welfare gains than the wealth tax. Furthermore, the subsidy policy increases consumption inequality, whereas the wealth tax reduces it slightly. We also consider an extension that models the transition path and find that individuals who are alive at the time of the policy change, on average, would incur large welfare losses if the new policy is OCIT but would experience large welfare gains if the new policy is an OWT. We conclude that wealth taxation has the potential to raise productivity while simultaneously reducing consumption inequality.
关键词: Capital income tax, Wealth taxation, Wealth inequality, Power law models, and Rate of return heterogeneity 学科: E21 - Macroeconomics: Consumption; Saving; Wealth, H21 - Taxation and Subsidies: Efficiency; Optimal Taxation, E22 - Investment; Capital; Intangible Capital; Capacity, and E62 - Fiscal Policy
Creator: Kaplan, Greg and Schulhofer-Wohl, Sam Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 725 Abstract:
This appendix contains eight sections. Section 1 gives technical details of how we calculate standard errors in the CPS data. Section 2 discusses changes in the ACS procedures before 2005. Section 3 examines demographic and economic patterns in migration over the past two decades, in more detail than in the main paper. Section 4 examines the cross-sectional variance of location-occupation interactions in earnings when we define locations by MSAs instead of states. Section 5 describes alternative methods to estimate the variance of location-occupation interactions in income. Section 6 measures the segregation of industries across states and of occupations and industries across MSAs. Section 7 gives technical details on the use of SIPP and census data to calculate repeat and return migration rates. Section 8 discusses transition dynamics in the model.
关键词: Gross flows, Labor mobility, Information technology, Interstate migration, and Learning 学科: R12 - Size and Spatial Distributions of Regional Economic Activity, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J11 - Demographic Trends, Macroeconomic Effects, and Forecasts, J61 - Geographic Labor Mobility; Immigrant Workers, R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics, and D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Creator: Kaplan, Greg and Schulhofer-Wohl, Sam Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 697 Abstract:
We analyze the secular decline in interstate migration in the United States between 1991 and 2011. Gross flows of people across states are about 10 times larger than net flows, yet have declined by around 50 percent over the past 20 years. We argue that the fall in migration is due to a decline in the geographic specificity of returns to occupations, together with an increase in workers’ ability to learn about other locations before moving there, through information technology and inexpensive travel. These explanations find support in micro data on the distribution of earnings and occupations across space and on rates of repeat migration. Other explanations, including compositional changes, regional changes, and the rise in real incomes, do not fit the data. We develop a model to formalize the geographic-specificity and information mechanisms and show that a calibrated version is consistent with cross-sectional and time-series patterns of migration, occupations, and incomes. Our mechanisms can explain at least one-third and possibly all of the decline in gross migration since 1991.
关键词: Gross flows, Labor mobility, Information technology, Learning, and Interstate migration 学科: R12 - Size and Spatial Distributions of Regional Economic Activity, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J11 - Demographic Trends, Macroeconomic Effects, and Forecasts, J61 - Geographic Labor Mobility; Immigrant Workers, R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics, and D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Creator: Lagos, Ricardo and Zhang, Shengxing Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 734 Abstract:
We provide empirical evidence of a novel liquidity-based transmission mechanism through which monetary policy influences asset markets, develop a model of this mechanism, and assess the ability of the quantitative theory to match the evidence.
关键词: Liquidity, Monetary transmission, Monetary policy, and Asset prices 学科: G12 - Asset Pricing; Trading Volume; Bond Interest Rates, D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness, and E52 - Monetary Policy
Creator: Alvarez, Fernando, 1964-, Atkeson, Andrew, and Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 627 Abstract:
Time-varying risk is the primary force driving nominal interest rate differentials on currency-denominated bonds. This finding is an immediate implication of the fact that exchange rates are roughly random walks. We show that a general equilibrium monetary model with an endogenous source of risk variation—a variable degree of asset market segmentation—can produce key features of actual interest rates and exchange rates. The endogenous segmentation arises from a fixed cost for agents to exchange money for assets. As inflation varies, the benefit of asset market participation varies, and that changes the fraction of agents participating. These effects lead the risk premium to vary systematically with the level of inflation. Our model produces variation in the risk premium even though the fundamental shocks have constant conditional variances.
关键词: Time-varying conditional variances, Pricing kernel, Fama puzzle, Segmented markets, Forward premium anomaly, and Asset pricing-puzzle 学科: F31 - Foreign Exchange, F41 - Open Economy Macroeconomics, G15 - International Financial Markets, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, F30 - International Finance: General, and E43 - Interest Rates: Determination, Term Structure, and Effects
Creator: Chodorow-Reich, Gabriel and Karabarbounis, Loukas Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 733 Abstract:
By how much does an extension of unemployment benefits affect macroeconomic outcomes such as unemployment? Answering this question is challenging because U.S. law extends benefits for states experiencing high unemployment. We use data revisions to decompose the variation in the duration of benefits into the part coming from actual differences in economic conditions and the part coming from measurement error in the real-time data used to determine benefit extensions. Using only the variation coming from measurement error, we find that benefit extensions have a limited influence on state-level macroeconomic outcomes. We use our estimates to quantify the effects of the increase in the duration of benefits during the Great Recession and find that they increased the unemployment rate by at most 0.3 percentage point.
关键词: Unemployment, Unemployment insurance, and Measurement error 学科: E62 - Fiscal Policy, J64 - Unemployment: Models, Duration, Incidence, and Job Search, J65 - Unemployment Insurance; Severance Pay; Plant Closings, and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity