Browsing by Subject "Business Cycles"

Now showing 1 - 6 of 6
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    Essays in Labor Markets and Human Capital
    (2018-07) Garcia-Cabo Herrero, Joaquin
    This thesis studies how labor market institutions affect the careers of workers. To do so, I exploit the availability of Spanish Social Security data on workers' labor histories. Chapter 1 introduces the topic and presents an overview of the results of this thesis. Chapter 2 studies the impact of these regulations. In particular, it examines the effect of firing costs on human capital accumulation, cyclicality of job creation, and persistence of job loss. Chapter 3 presents macroeconomic evidence that the correlation between productivity and employment is negative in southern European countries, and assesses the role of two-tier labor markets in generating that correlation. Chapter 4 documents the determinants of becoming self-employed in labor markets characterized by high unemployment and low job stability.
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    Essays in Macroeconomics
    (2017-06) Ding, Kai
    This dissertation consists of two essays. In the first essay, Enoch Hill and I develop a dynamic general equilibrium model in which an increase in the importance of firm-specific human capital is able to account for two key changes in business cycle patterns in the U.S. since mid-1980s: jobless recoveries and the reversal in the cyclicality of labor productivity. Additionally, we present empirical support that the importance of firm-specific human capital has indeed increased in importance for recent recessions. In the second essay, Zhifeng Cai and I develop a macroeconomic model of financial frictions in order to account for the investment and cash holding behavior of self-financing corporations during the Great Recession. Unlike standard models of financial frictions which impose collateral or borrowing constraints on firms, the financial frictions in our model work through the liquidity channel. In our model, corporate investment is subject to liquidity shocks. Bank credit line and liquid assets are substitutes for financing liquidity shocks. In our model, a tightening of the bank credit line forces firms to hold more liquid assets, increasing the effective cost of capital expenditure hence reducing corporate investment.
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    Essays in Macroeconomics
    (2019-07) Salgado, Sergio C.
    This dissertation consists of three chapters. In the first essay of my thesis, I document a marked declined in the share of entrepreneurial households in the United States and I propose and quantify a mechanism to account for such decline. Using individual-level data, I provide evidence on the decline in the population share of entrepreneurs and in the entry rate into entrepreneurship. I also show that the decline is most concentrated among college graduates. Then, using an otherwise standard entrepreneurial choice model with two skill groups of individuals, I show that the decline in entrepreneurship is the equilibrium outcome of two forces that have increased the returns to high skill labor: the skill-biased technical change and the decrease in the cost of capital goods. I find that these two technological forces jointly account for three-quarters of the decline in the share of entrepreneurs observed in the United States over the last 30 years. In the second essay of this thesis, Nicholas Bloom, Fatih Guvenen, and I study the cyclicality the distribution of firm-leve outcomes over the business cycle. Using firm-level panel data from the US Census and for more than forty other countries, we show that the skewness of the growth rate of employment and sales is procyclical. In particular, during recessions, they display a large left tail of negative growth rates (and during booms, a large right tail of positive growth rates). These results are robust to different selection criteria, across countries, industries, and measures. We find similar results at the industry level: industries with falling growth rates see more left-skewed growth rates of firm sales. We then build a heterogeneous agents model in which entrepreneurs face shocks with time-varying skewness that matches the firm-level distributions we document for the United States. Our quantitative results show that a negative shock to the skewness of firms’ productivity growth (keeping the mean and variance constant) generates a significant and persistent drop in output, investment, hiring, and consumption. In the third and last essay of this thesis, Mons Chan, Min Xu, and I, study the importance of fluctuation of firm-level productivity in explaining the fluctuations in workers’ wages. In particular, we use matched employer-employee data from Denmark to analyze the extent to which firms’ productivity shocks are passed to workers’ wages. The richness of our dataset allows us to separately study continuing and non-continuing workers, to correct for selection, and to investigate how the passthrough varies across narrow population groups. Our results show a much larger degree of passthrough from firms’ shocks to workers’ wages than reported in previous research. On average, an increase of one standard deviation in firm-level TFP commands an increase of 3.0% in annual wages ($1,500 USD for the average worker). Furthermore, we find that the effect of productivity shocks on wage growth for workers who switch firms is larger relative to workers that stay within the same firm. Finally, we find large differences in the passthrough for workers of different income levels, ages, industries, and firms of different productivity levels. In the second part of our paper, we estimate a stochastic process of income that captures the salient features the data. We then embed the estimated stochastic process into a life-cycle consumption savings model to evaluate the welfare and distributional implications of the passthrough from firms’ TFP shocks to workers’ wages.
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    Essays in Macroeconomics of the Labor Market
    (2015-07) Kim, Jiwoon
    This dissertation consists of three chapters. All chapters are related to business cycle issues in the labor market with search frictions. In Chapter 1, I examine the effect of medical re-evaluations for disability insurance (DI) recipients on the 1981 recession and its fast recovery. In the US, the recovery in the employment rate of men from the 1981 recession was faster than any other recovery since 1965. During the 1981 recession and at the beginning of its recovery, the number of disability insurance applicants and recipients dropped while the numbers increased in all other recessions. This decrease is attributed to the fact that the most stringent medical re-evaluations for DI recipients occurred between 1981 and 1983. Medical re-evaluation is a policy that periodically terminates benefits of ineligible DI recipients. This paper examines the role of medical re-evaluation in the 1981 recession and its fast recovery. To this end, I build a general equilibrium business-cycle search and matching model with health, DI and unemployment insurance (UI) eligibility. Medical re-evaluations affect the number of people who search for jobs (direct effect) and job-finding probabilities for all unemployed people (general equilibrium effect). The overall effect of the policy depends on the willingness of firms to hire workers. The main experiment shows that the change in stringency of medical re-evaluations during the 1981 recession made the recession deeper and the recovery faster. In Chapter 2, my coauthor, John Seliski, and I develop a model with both frictional labor markets and financial frictions to explore how the dynamics of real and financial variables are affected by financial shocks. Financial shocks affect the borrowing capacity of firms in the economy. In particular, we evaluate how important the inclusion of financial shocks is in accounting for labor market fluctuations by using a standard RBC matching model as a benchmark. We find that the inclusion of financial frictions and financial shocks improves a standard matching model's ability to account for the observed dynamics of labor market variables. Financial frictions are able to generate more volatile hours per worker, labor shares, and employment relative to our benchmark matching model, bringing simulated moments closer to observed fluctuations. In Chapter 3, I study an alternative mechanism of wage negotiations in an environment where a firm hires more than one worker and the firm faces diminishing marginal product of labor (MPL). When Nash bargaining with a marginal worker breaks down, a firm negotiates wages with existing workers collectively and produces with them. Due to diminishing MPL, the breakdown of the negotiation with the marginal worker negatively affects the bargaining position of the firm with existing workers (one fewer workers) since MPL is higher with one fewer workers. How much the firm internalizes this negative effect depends on stochastic bargaining powers of existing workers which can be identified through labor share data. The stochastic bargaining power of existing workers provides an additional margin to increase the volatility of labor market variables. In contrast to the prediction of Rios-Rull and Santaeulalia-Llopis (2010), in which the effect of productivity shocks is dampened when labor share overshoots due to huge wealth effects from the overshooting property, this paper presents a model in which the labor share overshoots and the volatility of employment closely matches that of US data.
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    Essays on dynamic economies with frictions.
    (2010-07) Slavik, Ctirad
    This dissertation consists of two essays. In the first essay we analyze the role of frictions in the pattern of intergenerational transfers. Simple theories about why parents give money to their children fail to explain a central puzzle in inter-generational transfers: While they are alive, parents give more money to their poorer children. When they leave bequests, most parents divide money equally among their children regardless of their income. We develop a model in which parents cannot observe their children's productivity. We show that parents differentiate between gifts and bequests to help their children more effectively. Parents are able to use future income uncertainty to provide the children with more help and better incentives. We show that in our model poor children get more in gifts than richer children and bequests are equal for all children under some parameterizations. We build a richer quantitative model to compare the explanatory power of our model as compared with a frictionless environment when parameters are picked to match US income and wealth data. We find that our model significantly reduces the costs needed to rationalize equal division of bequests relative to a frictionless environment. In the second essay we analyze the role of financial frictions in high asset price volatility. Existing dynamic general equilibrium models have have not been fully successful at explaining the high volatility of asset prices that we observe in the data. We construct a general equilibrium model with heterogeneous firms and financial frictions that addresses this issue. In each period only a fraction of firms can start new projects, which cannot be fully financed externally due to a financial constraint. We allow the tightness of the financial constraint to vary over time. Fluctuations in the tightness of the financial constraint result in fluctuations in the supply of equity and consequently in the price of equity. We calibrate the model to the U.S. data to assess the quantitative importance of fluctuations in the tightness of the financial constraint. The model generates a volatility in the price of equity comparable to the aggregate stock market while also fitting key aspects of the behavior of aggregate quantities.
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    Essays on Government Transfers and Labor Markets
    (2019-04) Birinci, Serdar
    This dissertation consists of three chapters. In the first chapter, I document a small spousal earnings response to the job displacement of the family head. The response is even smaller in recessions when earnings losses are larger and additional insurance is most valuable. I investigate whether the small response is an outcome of crowding-out effects of existing government transfers. To accomplish this, I use an incomplete asset markets model with family labor supply and aggregate fluctuations whose predicted spousal labor supply elasticities with respect to transfers are in line with microeconomic estimates both in aggregate and across subpopulations. In this model, counterfactual experiments indeed show that generous transfers in recessions discourage spousal labor supply significantly after the head's job displacement. Then, I solve for optimal means-tested transfers paid to poor families and employment-tested transfers paid to the unemployed. Unlike the current policy that maintains generous transfers of both types in recessions, I find that the optimal policy features procyclical means-tested and countercyclical employment-tested transfers. The second chapter (joint with Kurt See) studies the optimal design of unemployment insurance (UI) over the business cycle, paying particular attention to the effects of generous UI payments on firm vacancy creation. While UI provides insurance to jobless individuals, generous UI payment results in higher reservation wages, a corresponding reduction in firm vacancy creation, both of which lead to a decline in the job finding rate. Using a heterogeneous agent job search model, designed to consider the effects of UI on labor demand, we find that optimal UI policy should be countercyclical. Finally, the third chapter (joint with Anmol Bhandari, Ellen McGrattan, and Kurt Gerrard See) examines the reliability of widely used surveys on U.S. businesses. We compare survey responses of business owners with administrative data and document large inconsistencies in business incomes, receipts, and the number of owners. We document problems due to nonrepresentative samples and measurement errors. Nonrepresentativeness is refected in undersampling of owners with low incomes. Measurement errors arise because respondents do not refer to relevant documents and possibly because of framing issues. We conclude that predictions based on current survey data should be treated with caution.