Keywords: Capital gains taxation, dynamic contract, endogenous growth, funding rounds, IPO, monitoring, screening, venture capital
The Research-in-Progress Summer Tour
May 26th, Firm Dynamics and the Aggregate Economy, Becker-Friedman Institute, The University of Chicago
June 15th, Economic Growth and Fluctuations, Barcelona GSE Summer Forum
June 17th, 2017 North American Summer Meeting of the Econometric Society, Washington University, St Louis
June 19th, Credit and Labour Market Foundations of the Macroeconomy, MacCaLM Project, The University of Edinburgh
Keywords: Assortative mating, baby boom, baby bust, family economics, female labor supply, fertility, household income inequality, household production, human capital, macroeconomics, marriage and divorce, quality-quantity tradeoff, quantitative theory, premarital sex, single mothers, social change, survey, technological progress, women's rights
James A. Schmitz (2005) documents, in a well-known case study, a dramatic rise in productivity in the American and Canadian iron-ore industry following an increase in competition from Brazil. Prior to the increased competition, the industry was not competitive. Surplus in profits was divided between business and unions. Schmitz attributes the increase in productivity to a change in work practices in the industry, as old negotiated union work rules were abandoned or modified. This research formalizes a mechanism through which a rise in competition can lead to increased productivity in the iron-ore industry.
Keywords: Bodies, effort, James A. Schmitz, iron ore, membership, monopoly profits, Nash bargaining, productivity, unions
Eleven percent of the Malawian population is HIV infected. Eighteen percent of sexual encounters are casual. A condom is used one quarter of the time. To analyze the Malawian epidemic, a choice-theoretic general equilibrium search model is constructed. In the developed framework, people select between different sexual practices while knowing the inherent risk. The calibrated model is used to study several policy interventions. The analysis suggests that the efficacy of public policy depends upon the induced behavioral changes and equilibrium effects. The framework thus complements the insights provided by epidemiological studies and small-scale field experiments.
Keywords: circumcision, condoms, disease transmission, epidemiological studies, HIV/AIDS, homo economicus, Malawi, marriage, policy intervention, search, small field experiments, STDs, sex markets
Keywords: AIDS, circumcision, condoms, general equilibrium modeling, HIV, marriage and divorce, Malawi, sex markets, search
Keywords: Unionization, Union Organizing, Union Selection, Union Certification Election, Diffusion of Unionization, Employer Resistance to Unionization, Bayesian Learning
Keywords: Computer Age; De-unionization; Distribution of Income; Flexible Manufacturing; Mass Production; Numerically Controlled Machines; Skill-Biased Technological Change; Simulation Analysis; Union Membership
Keywords: Costly cash-flow control; costly state verification; dynamic contract theory; economic development; establishment-size distributions; finance and development; financial intermediation; India, Mexico, and the United States; long- and short-term contracts; monitoring; productivity; retained earnings; self-finance; technology adoption; ventures
Keywords: Growth, ideas, innovation, misallocation, patents, patent agents, research and development, search frictions
Jeremy Greenwood, Nezih Guner, Georgi Kocharkov and Cezar Santos (January 2016), "Technology and the Changing Family: A Unified Model of Marriage, Divorce, Educational Attainment and Married Female Labor-Force Participation," American Economic Journal: Macroeconomics, v. 8, n. 1: 1-41.
Keywords: Assortative mating, education, female labor supply, household income inequality, household production, marriage and divorce, minimum distance estimation
Jeremy Greenwood, Ananth Seshadri and Guillaume Vandenbroucke (September 2015), "Measurement without Theory, Once Again," Journal of Demographic Economics, v. 81, n. 3: 317-329.
Keywords: Amish, Appliances, Baby Boom, Bailey and Collins (2011), Fertility, Indirect Inference, Minimum Distance Estimation, Regressions
Erratum: Pg. 320 – Missing “=” sign inserted on pdf.
Keywords: Assortative mating, contingency table, Gini coefficient, income inequality, Lorenz curve, married female labor-force participation, standardized contingency table
Keywords: Add Health, contraception, culture, peer group effects, premarital sex, shame, socialization, stigma, technological progress
Keywords: Costly-state verification, economic development, financial intermediation, firm-size distribution, interest-rate spreads, cross-country output differences, cross-country TFP differences
Keywords: Compensating variation, computers, electricity, equivalent variation, Fisher ideal price index, new goods, technological progress, Tornqvist price index, welfare gain
Erratum: Pg. 345 – Noted on pdf for paper.
Keywords: Financial intermediation, economic development, costly-state verification, firm-size distribution.
Keywords: Social change; the sexual revolution; technological progress in contraceptives, bilateral search.
Keywords: Marriage, divorce, hours worked, household production, household size, technological progress.
Erratum: Eq. 9 – Lefthand side should read d(um-us)/dp.
Keywords: Hours worked, leisure, housework, household production, Edgeworth-Pareto complementarity/substitutability, technological progress.
Keywords: Investment-specific technological progress, capital embodiment, growth accounting.
Keywords: New goods, structural change, technological progress, welfare indices.
Keywords: Child labor, economic growth, educational attainment, female labor-force participation, fertility, household production theory, technological progress.
Keywords: Baby boom, baby bust, household production, technological progress.
Keywords: female labor-force participation, household production theory, the second industrial revolution, technology adoption.
According to Pareto (1896), the distribution of income depends on ``the nature of the people comprising a society, on the organization of the latter, and, also, in part, on chance.'' In the model developed here the ``nature of the people'' is captured by attitudes toward marriage, divorce, fertility, and children. Singles search for mates in a marriage market. Married agents bargain about work, and the quantity and quality of children. They can divorce. Social policies, such as child support requirements, reflect the ``organization of the (society).'' Finally, ``chance'' is modelled by randomness in income, marriage opportunities, and marital bliss.
Keywords: Fertility; marriage and divorce; Nash bargaining; income distribution; public policy
Between 1800 and 1940 the U.S. went through a dramatic demographic transition. In 1800 the average woman had 7 children, and 94 percent of the population lived in rural areas. By 1940 the average woman birthed just 2 kids, and only 43 percent of populace lived in the country. The question is: What accounted for this shift in the demographic landscape? The answer given here is that technological progress in agriculture and manufacturing explains these facts.
Keywords: Fertility, technological progress, agriculture, manufacturing.
JEL Classification Nos: E1, J1, O3.
S. Rao Aiyagari, Jeremy Greenwood, and Ananth Seshadri (February 2002), "Efficient Investment in Children," Journal of Economic Theory, v. 102, n. 2: 290-321.
Many would say that children are society's most precious resource. So, how should we invest in them? To gain insight into this question, a dynamic general equilibrium model is developed where children differ by ability. Parents invest time and money in their offspring, depending on their altruism. This allows their children to grow up as more productive adults. First, the efficient allocation is characterized. Next, this is compared with the outcome that arises when financial markets are incomplete. The situation where child-care markets are also lacking is then examined. Additionally, the consequences of impure altruism are analyzed.
Keywords: Investment in children; efficiency; imperfect financial markets; impure altruism; lack of child-care markets.
JEL Classifications: D1, D31, D58, I2
Erratum: Eq. 34 – Put a θ in front of the V.
A search-theoretic model of equilibrium unemployment is constructed and shown to be consistent with the key regularities of the labor market and business cycle. The two distinguishing features of the model are: (i) the decision to accept or reject jobs is modeled explicitly, and (ii) markets are incomplete. The model is well suited to address a number of interesting policy questions. Two such applications are provided: the impact of unemployment insurance, and the welfare costs of business cycles.
Keywords: Search; incomplete markets; business cycles; unemployment insurance; welfare costs of business cycles.
JEL Classifications: E24, E32
A satisfactory account of the postwar growth experience of the United States should be able to come to terms with the following three facts:
Variants of Solow's (1960) vintage-capital model can go a long way toward explaining these facts, as this paper shows. In brief, the explanations are:
Keywords: Investment-specific technological progress, vintage-capital models, learning by doing, diffusion lags.
JEL Classifications: O3, O4
This is a quantitative investigation of the importance of technological change specific to new investment goods for postwar U.S. aggregate fluctuations. A growth model that incorporates this form of technological change is calibrated to U.S. data and simulated, using the relative price of new equipment to identify the process driving investment-specific technology shocks. The analysis suggests that this form of technological change is the source of about 30 percent of output fluctuations.
Keywords: Investment-specific technological change; business cycles
JEL Classification: E3, O3, O4
An overlapping generations model of marriage and divorce is constructed to analyze family structure and intergenerational mobility. Agents differ by sex, marital status, and human capital. Single agents meet in a marriage market and decide whether to accept or reject proposals to wed. Married couples must decide whether to separate or not. Parents invest in their children depending on their wherewithal. A simulated version of the theoretical prototype can generate an equilibrium with a significant number of female-headed families and a high degree of persistence in income across generations. To illustrate the model's mechanics, the effects of two anti-poverty policies, namely child support and welfare, are investigated.
Keywords: Intergenerational mobility; marriage and divorce; children; public policy
Michael Gort, Jeremy Greenwood, and Peter Rupert (January 1999), "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics v. 2, n. 1: 207-230.
How much technological progress has there been in structures? An attempt is made to measure this using panel data on the age and rents for buildings. This data is interpreted through the eyes of a vintage capital model where buildings are replaced at some chosen periodicity. There appears to have been significant technological advance in structures that accounts for a major part of economic growth.
Keywords: Investment-specific technological progress; economic growth; vintage capital; replacement problem; economic depreciation; rent gradient.
Discovering how economies grow is vitally important for economists and policymakers alike. This Commentary shows that more than half of U.S. economic growth can be attributed to technological advance in equipment and structures.
A prototypical vintage capital model of economic growth is developed, where the decision to replace old technologies with new ones is modeled explicitly. Technological change is investment specific. Depreciation in this environment is an economic, not a physical, concept. The vintage capital economy's balanced-growth paths and transitional dynamics are analyzed. The transitional dynamics are markedly different from the standard neoclassical growth model.
Keywords: Investment-Specific Technological Change; Vintage Capital; Economic Growth
Was 1974 a watershed? It was dawning of the information age, a period of rapid technological advance associated with the introduction of information technologies. It also was the start of a sharp rise in income inequality and signaled the beginning of the productivity slowdown. Were these phenomena related? Could they have been the result of an Industrial Revolution associated with the introduction of information technologies? The answer offered here is yes, and a simple theory connecting the phenomena is outlined. Evidence is presented showing that the coincidence of rapid technological change, widening inequality, and slowdowns in productivity growth are not with out precedence in economic history. Just as the steam engine shook 18th century England, and electricity rattled 19th century America, it is argued that information technologies are rocking the 20th century economy. (This paper is a nontechnical version of "1974".)
The role that investment-specific technological change played in generating postwar U.S. growth is investigated here. The premise is that the introduction of new, more efficient capital goods is an important source of productivity change, and an attempt is made to disentangle its effects from the more traditional Hicks-neutral form of technological progress. The balanced-growth path for the model is characterized and calibrated to U.S. National Income and Product Account data. The quantitative analysis suggests that investment-specific technological change accounts for the major part of growth.
What is the relationship between markets and development? It is argued that markets promote growth, and that growth in turn encourages the formation of markets. Two models with endogenous market formation are presented to analyze this issue. The first examines the role that financial markets - banks and stockmarkets - play in allocating funds to the highest valued use in the economic system. It is shown that intermediation will arise under weak conditions. The second focuses on the role that markets play in supporting specialization in economic activity. The consequences of perfect competition in market formation are highlighted.
Was 1974 a watershed? It saw an increase in the rate of technological change in the production of new equipment. It was the start of a sharp rise in income inequality. It signaled the beginning of the productivity slowdown. Were these phenomena related? Could they have been the result of an Industrial Revolution associated with the introduction of information technologies?
Three key features of the employment process in the U.S. economy are that job creation is procyclical, job destruction is countercyclical, and job creation is less volatile than job destruction. These features are also found at the sectoral (goods and services) level. The paper develops, calibrates and simulates a two-sector general equilibrium model that includes both aggregate and sectoral shocks. The behavior of the model economy mimics the job creation and destruction facts. A non-negligible amount of unemployment arises due to the presence of aggregate and sectoral shocks.
This paper surveys the role of household production in modern business cycle analysis.
Abridged version of the Paper
The question of the existence of a stationary equilibrium for distorted versions of the standard neoclassical growth model is addressed in this paper. The conditions presented guaranteeing the existence of nontrivial equilibrium for the class of economies under study are simple and intuitively appealing, while the existence proof developed is elementary. Examples are given illustrating that economies with distortional taxation, endogenous growth with externalities, and monopolistic competition can all fit into the framework developed.
A real business cycle model with two types of agents, workers and entrepreneurs, is simulated to see if it can account for some stylized facts characterizing postwar U.S. business cycle fluctuations, such as the countercyclical movement of labor's share of income, and the acyclical behavior of real wages. It can. There exists an economy- wide market for contingent claims. On this market workers purchase insurance from entrepreneurs, through optimal labor contracts, against losses in income due to business cycle fluctuations. Insurance flows protecting workers against aggregate cyclical risk are calculated to be less than one percent of labor income.
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