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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 ...
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
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
Accounting for Innovations in Consumer Digital Services: IT still matters
This paper develops a framework for measuring digital services in the face of ongoing innovations in the delivery of content to consumers. We capture what Brynjolfsson and Saunders (2009) call "free goods" as the capital services generated by connected consumers' stocks of IT digital goods; this service flow augments the existing measure of personal consumption in GDP. Its value is determined by the intensity with which households use their IT capital to consume content delivered over networks, and its volume depends on the quality of the IT capital. Consumers pay for delivery services, ...
Working Paper
International real business cycles with endogenous markup variability
The aggregate impact of decisions made at the level of the individual firm has recently attracted a lot of attention in both the macro and trade literatures. We adapt the benchmark international real business cycle model to a game-theoretic environment to add a channel for the strategic interaction among domestic and foreign firms. We show how the sum of strategic pricing decisions made at the level of the individual firm can have significant effects on the volatility and cross country co-movement of GDP and its components. Specifically we show that the addition of this one channel for ...
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 ...
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, ...
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 ...
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.
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 ...