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Working Paper
Firm Entry and Macroeconomic Dynamics: A State-level Analysis
Using an annual panel of U.S. states over the period 1982-2014, we estimate the response of macroeconomic variables to a shock to the number of new firms (startups). We find that these shocks have significant effects that persist for many years on real gross domestic product, productivity and population. This is consistent with simple models of firm dynamics where a ?missing generation? of firms affects productivity persistently.
Report
Cost-Price Relationships in a Concentrated Economy
The US economy is at least 50 percent more concentrated today than it was in 2005. In this paper, we estimate the effect of this increase on the pass-through of cost shocks into prices. Our estimates imply that the pass-through becomes about 25 percentage points greater when there is an increase in concentration similar to the one observed since the beginning of this century. The resulting above-trend price growth lasts for about four quarters. Our findings suggest that the increase in industry concentration over the past two decades could be amplifying the inflationary pressure from current ...
Working Paper
Structural Change and Global Trade
Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. In a trade model featuring nonhomothetic preferences and input-output linkages, we find that such structural change has restrained the growth in world trade to GDP by 16 percentage points over this period. This magnitude is similar to how much declining trade costs have boosted openness. Moreover, structural change dampens the measured gains from trade by incorporating endogenous responses of expenditure shares to the trade regime. Ongoing structural change implies declining ...
Working Paper
How Fast are Semiconductor Prices Falling?
The Producer Price Index (PPI) for the United States suggests that semiconductor prices have barely been falling in recent years, a dramatic contrast to the rapid declines reported from the mid-1980s to the early 2000s. This slowdown in the rate of decline is puzzling in light of evidence that the performance of microprocessor units (MPUs) has continued to improve at a rapid pace. Over the course of the 2000s, the MPU prices posted by Intel, the dominant producer of MPUs, became much stickier over the chips' life cycle. As a result of this change, we argue that the matched-model methodology ...
Working Paper
Cost-Price Relationships in a Concentrated Economy
We use local projections with granular instrumental variables to estimate the aggregate pass-through of costs into prices and how it is affected by industry concentration. On average, we find, prices increase above trend growth for three quarters after an exogenous cost shock, and the price increase is accompanied by a decline in output. The estimated pass-through of the shock into prices one quarter ahead is 0.7. The price response to shocks becomes about 27 percent larger when there is an increase in concentration similar to the one observed over the last 20 years. This differential effect ...
Working Paper
Structural Change in Labor Supply and Cross-Country Differences in Hours Worked
This paper studies how structural change in labor supply along the development spectrum shapes cross-country differences in hours worked. We emphasize two main forces: sectoralreallocation from self-employment to wage work, and declining fixed costs of wage work. We show that these forces are crucial for understanding how the extensive margin (the employment rate) and intensive margin (hours per worker) of aggregate hours worked vary with income per capita. To do so we build and estimate a quantitative model of labor supply featuring a traditional self-employment sector and a modern ...
Working Paper
The role of two frictions in geographic price dispersion: when market friction meets nominal rigidity
This paper empirically investigates and theoretically derives the implications of two frictions, market friction and nominal rigidity, on the dynamic properties of intra-national relative prices, with an emphasis on the interaction of the two frictions. By analyzing a panel of retail prices of 45 products for 48 cities in the U.S., we make two major arguments. First, the effect of each type of friction on the dynamics of intercity price gaps is quite different. While market frictions arising from physical distance and transportation costs contribute significantly to volatile and persistent ...
Journal Article
Industrial production and capacity utilization: 1998 annual revision
In late 1998, the Federal Reserve published the results of an annual revision of its measures of industrial production, capacity, and capacity utilization, which cover the nation's manufacturing, mining, and electric and gas utilities industries. The revision involved both the incorporation of newly available and more comprehensive source data and, for some series, the introduction of modified methods for compiling the series. The revised figures show stronger growth of both production and capacity since 1996; however, the overall capacity utilization rate was little changed from the previous ...
Working Paper
Exchange rate pass-through, domestic competition and inflation -- evidence from the 2005/08 revaluation of the Renminbi
How important is the effect of exchange rate fluctuations on the competitive environment faced by domestic firms and the prices they charge? To answer this question, this paper examines the 17 percent appreciation of the yuan against the U.S. dollar from 2005 to 2008. In a monthly panel covering 110 sectors, a 1 percent appreciation of the Yuan increases U.S. import prices by roughly 0.8 percent. It is then shown that import prices, in turn, pass through into producer prices at an average rate of roughly 0.7, implying that a 1 percent Yuan appreciation increases the average U.S. producer ...
Working Paper
Macroeconomic Changes with Declining Trend Inflation: Complementarity with the Superstar Firm Hypothesis
Recent studies indicate that, since 1980, the average markup and the profit share of income have increased, while the labor share and the investment share of spending have decreased. We examine the role of monetary policy in these changes as inflation has concurrently trended down. In a simple staggered price model with a non-CES aggregator of differentiated goods, a decline in trend inflation as measured since 1980 can account for a substantial portion of the changes. Moreover, introducing a rise in the productivity of “superstar firms” in the model can better explain not only the ...