Search Results
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. Using a Ricardian trade model incorporating endogenous structural change, we quantify how this substantial shift in consumption has affected trade. Without structural change, we find that the world trade to GDP ratio would be 15 percentage points higher by 2015, about half the boost delivered from declining trade costs. In addition, this structural change has lowered the global welfare gains from trade integration by almost 40 percent over the past four decades. Absent further ...
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
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 ...
Journal Article
Industrial production and capacity utilization: the 2000 annual revision
In late 2000, the Federal Reserve Board published the annual revision of its index of industrial production and related measures of capacity and utilization for the period January 1992 through October 2000. The updated measures reflect the incorporation of newly available, more comprehensive source data, the introduction of new production series, and changes in methods. For this revision, two new years of comprehensive data on manufacturing output became available; otherwise, the updating of the data was typical of annual revisions. ; Total industrial output has increased, on average, 5.1 ...
Newsletter
The increasing importance of services expenditures and the dampening effect on global trade
Globalization, particularly through international trade in goods, has helped to foster the creation of tremendous amounts of wealth and prosperity across much of the globe while lifting sizable portions of the world’s population out of poverty. In particular, the latter half of the twentieth century delivered unprecedented rates of increased economic integration among many countries. Access to global markets supported the industrialization of emerging economies and opened up new markets for firms in wealthier countries. As a result of the expansion of international trade and competition, ...
Working Paper
Structural Change and Global Trade
Services, which are less traded than goods, rose from 50 percent of world expenditure in 1970 to 80 percent in 2015. Such structural change restrained "openness"?the ratio of world trade to world GDP?over this period. We quantify this with a general equilibrium trade model featuring non-homothetic preferences and input-output linkages. Openness would have been 70 percent in 2015, 23 percentage points higher than the data, if expenditure patterns were unchanged from 1970. Structural change is critical for estimating the dynamics of trade barriers and welfare gains from trade. Ongoing ...
Report
Who bears the cost of a change in the exchange rate? The case of imported beer
This paper quantifies the welfare effects of a change in the nominal exchange rate using the example of the beer market. I estimate a structural econometric model that makes it possible to compute manufacturers' and retailers' pass-through of a nominal exchange-rate change, without observing wholesale prices or firms' marginal costs. I conduct counterfactual experiments to quantify how the change affects domestic and foreign firms' profits and domestic consumer welfare. The counterfactual experiments show that foreign manufacturers bear more of the cost of an exchange-rate change than do ...
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
Inflation in Disaggregated Small Open Economies
This paper studies inflation in small open economies with production networks. I show that production networks alter the elasticity of the consumer price index (CPI) to changes in sectoral technology, factor prices, and import prices. Sectors can import and export directly but also indirectly through domestic intermediate inputs. Indirect exporting dampens the inflationary pressure from domestic forces, while indirect importing increases the inflation sensitivity to import price changes. Computing these CPI elasticities requires knowledge of the production network structure because these do ...