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Jel Classification:E23 

Report
The production impact of "cash-for-clunkers": implications for stabilization policy

Stabilization policies frequently aim to boost spending as a means to increase GDP. Spending does not necessarily translate into production, however, especially when inventories are involved. We look at the ?cash-for-clunkers? program that helped finance the purchase of nearly 700,000 vehicles in 2009. An analysis of auto sales and production movements reveals that the program did prompt a large spike in sales. But the program had only a modest and fleeting impact on production, as inventories buffered the movements in sales. These findings suggest caution in judging the efficacy of such ...
Staff Reports , Paper 503

Working Paper
Earnings Inequality and the Minimum Wage: Evidence from Brazil

We show that an increase in the minimum wage can have large effects throughout the earnings distribution, using a combination of theory and evidence. To this end, we develop an equilibrium search model featuring empirically relevant worker and firm heterogeneity. The minimum wage induces firms to adjust their equilibrium wage and vacancy policies, leading to spillovers on higher wages. We use the estimated model to evaluate the effects of a 119 percent increase in the real minimum wage in Brazil from 1996 to 2012. The policy change explains a large decline in earnings inequality, with ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 7

Working Paper
Sectoral Impact of COVID-19: Cascading Risks

Workers are unequal in the face of the COVID-19 pandemic: Those who work in essential sectors face higher health risk whereas those in non-essential social-consumption sectors face greater economic risk. We study how these health and economic risks cascade into other sectors through supply chains and demand linkages. In the U.S., we find the cascading effects account for about 25-30% of the exposure to both risks. The cascading effect increases the health risk faced by workers in the transportation and retail sectors, and it increases the economic risk faced by workers in the textile and ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 31

Report
Appendix for Financial Frictions and Fluctuations in Volatility

This appendix contains five sections. Section 1 provides details for the comparative statics exercise performed in the simple example. Section 2 discusses extending the model to allow firms to default on the wages for managers. Section 3 describes the firm-level and aggregate data. Section 4 contains the details of the computational algorithm. Finally, Section 5 reports the results for our model with a lower labor elasticity.
Staff Report , Paper 538

Working Paper
Long and Plosser Meet Bewley and Lucas

We develop a N-sector business cycle network model a la Long and Plosser (1983), featuring heterogenous money demand a la Bewley (1980) and Lucas (1980). Despite incomplete markets and a well-defined distribution of real money balances across heterogeneous households, the enriched N-sector network model remains analytically tractable with closed-form solutions up to the aggregate level. Relying on the tractability, we establish several important results: (i) The economy's input-output network linkages become endogenously time-varying over the business cycle?thanks to the influence of the ...
Working Papers , Paper 2018-8

Working Paper
The great housing boom of China

China?s housing prices have been growing nearly twice as fast as national income over the past decade, despite a high vacancy rate and a high rate of return to capital. This paper interprets China?s housing boom as a rational bubble emerging naturally from its economic transition. The bubble arises because high capital returns driven by resource reallocation are not sustainable in the long run. Rational expectations of a strong future demand for alternative stores of value can thus induce currently productive agents to speculate in the housing market. Our model can quantitatively account for ...
Working Papers , Paper 2014-22

Working Paper
The Aggregate Implications of Size Dependent Distortions

This paper examines the aggregate implications of size-dependent distortions. These regulations misallocate labor across firms and hence reduce aggregate productivity. It then considers a case-study of labor laws in France where firms that have 50 employees or more face substantially more regulation than firms that have less than 50. The size distribution of firms is visibly distorted by these regulations: there are many firms with exactly 49 employees. A quantitative model is developed with a payroll tax of 0.15% that only applies to firm above 50 employees. Removing the regulation improves ...
Working Papers , Paper 2016-24

Working Paper
Diverging Trends in National and Local Concentration

Using U.S. NETS data, we present evidence that the positive trend observed in national product-market concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least seven years. Our findings, therefore, reconcile the ...
Working Paper , Paper 18-15

Working Paper
Aggregate Implications of Changing Sectoral Trends

We find disparate trend variation in TFP and labor growth across major U.S. production sectors over the post-WWII period. When aggregated, these sector-specific trends imply secular declines in the growth rate of aggregate labor and TFP. We embed this sectoral trend variation into a dynamic multi-sector framework in which materials and capital used in each sector are produced by other sectors. The presence of capital induces important network effects from production linkages that amplify the consequences of changing sectoral trends on GDP growth. Thus, in some sectors, changes in TFP and ...
Working Paper , Paper 19-11

Working Paper
Misallocation and Credit Market Constraints: the Role of Long-Term Financing

We measure aggregate productivity loss due to credit market constraints in a model with endogenous borrowing constraints, long-duration bonds, and costly equity payouts. Due to long-duration bonds, the model generates a realistic distribution of credit spreads. We structurally estimate our model using firm-level data on credit spreads from Thomson Reuters Bond Security Data and balance sheet data from Compustat. Credit market constraints increase aggregate productivity by 0.4% through their effect on the credit spread distribution. However, credit market constraints also interact with costly ...
Working Paper , Paper 19-1

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Fernald, John G. 6 items

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