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Jel Classification:E23 

Report
Productivity in the slow lane?: the role of information and communications technology

As the current recovery matures in the United States, evidence is mounting that total factor productivity (TFP), the typical measure of technological change, has moved back into the slow lane. This study uses industry data to explore the extent to which the acceleration in TFP in the late 1990s and early 2000s and the subsequent deceleration are attributable to unmeasured investment by firms to take full advantage of the new capabilities made possible by information and communications technology (ICT).
Current Policy Perspectives , Paper 14-10

Report
Why has the cyclicality of productivity changed?: what does it mean?

Historically, U.S. labor productivity (output per hour) and total factor productivity (TFP) rose in booms and fell in recessions. Different models of business cycles explain this procyclicality differently. Traditional Keynesian models relied on "factor hoarding," that is, variations in how intensively labor and capital were utilized over the business cycle. Real business cycle (RBC) models instead posit that procyclical technology shocks drive the business cycle. Since the mid-1980s, however, the procyclicality of productivity has waned. TFP has been roughly acyclical with respect to ...
Current Policy Perspectives , Paper 15-6

Report
Newer need not be better: evaluating the Penn World Tables and the World Development Indicators using nighttime lights

Nighttime lights data are a measure of economic activity whose measurement error is plausibly independent of the errors of most conventional indicators. Therefore, we can use nighttime lights as an independent benchmark to assess existing measures of economic activity (Pinkovskiy and Sala-i-Martin 2016). We employ this insight to find out which vintages of the Penn World Tables (PWT) and of the World Development Indicators (WDI) better estimate true income per capita. We find that revisions of the PWT do not necessarily dominate their predecessors in terms of explaining nighttime lights (and ...
Staff Reports , Paper 778

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

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