[PDF] Essays On Macroeconomic Implications Of Financial And Labor Markets And Political Processes eBook

Author : Rohan Kekre
Publisher :
Page : pages
File Size : 34,86 MB
Release : 2016
Category :
ISBN :

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Motivated by policy debates emerging from the U.S. Great Recession and Eurozone crisis, I study the stabilization role of monetary, fiscal, and macroprudential policies in response to short-run fluctuations. In the first essay on "Unemployment Insurance in Macroeconomic Stabilization", I characterize the role of unemployment insurance (UI) generosity as a particular instrument of fiscal policy, and use my framework to quantitatively evaluate the employment and welfare effects of UI extensions in the U.S. over 2008-13. In the second essay on "Labor Market Frictions in a Monetary Union", I study stabilization trade-offs and optimal monetary policy in a monetary union where labor markets are frictional and heterogeneous across member states, with implications for the sustainability of the Euro and policy of the ECB. In the third essay on "Firm vs. Bank Leverage over the Business Cycle", I develop a general equilibrium model explaining the contrasting cyclical behavior of non-financial corporate and bank leverage in U.S. data, and study its implications for macroprudential regulation in banking. Methodologically, these essays share a focus on building theoretical models of closed and open economies to address policy-relevant questions in macroeconomics, drawing on additional ideas from related fields such as public economics and finance.

Author : Miren Azkarate-Askasua
Publisher :
Page : 0 pages
File Size : 21,62 MB
Release : 2020
Category :
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This thesis contains three essays on the macroeconomic effects of labor markets with a special emphasis on market power and the determination of wages. In the first chapter, Miguel Zerecero and I study the efficiency and welfare effects of employer and union labor market power. We use data of French manufacturing firms to first document a negative relationship between employment concentration and wages and labor shares. At the micro-level, we identify the effects of employment concentration thanks to mass layoff shocks to competitors. Second, we develop a bargaining model in general equilibrium that incorporates employer and union labor market power. The model features structural labor wedges that are heterogeneous across firms and potentially generate misallocation of resources. We propose an estimation strategy that separately identifies the structural parameters determining both sources of labor market power. Furthermore, we allow different parameters across industries which contributes to the heterogeneity of the wedges. We show that observing wage and employment data is enough to compute counterfactuals relative to the baseline. Third, we evaluate the efficiency and welfare losses from labor market distortions. Eliminating employer and union labor market power increases output by 1.6% and the labor share by 21 percentage points translating into significant welfare gains for workers. Workers' geographic mobility is key to realize the output gains from competition. In the second chapter, Miguel Zerecero and I propose a bias correction method for estimations of quadratic forms in the parameters of linear models. It is known that those quadratic forms exhibit small-sample bias that appears when one wants to perform a variance decomposition such as decomposing the sources of wage inequality. When the number of covariates is large, the direct computation for a bias correction is not feasible and we propose a bootstrap method to estimate the correction. Our method accommodates different assumptions on the structure of the error term including general heteroscedasticity and serial correlation. Our approach has the benefit of correcting the bias of multiple quadratic forms of the same linear model without increasing the computational cost and being very flexible. We show with Monte Carlo simulations that our bootstrap procedure is effective in correcting the bias and we compare it to other methods in the literature. Using administrative data for France, we apply our method by doing a variance decomposition of a linear model of log wages with person and firm fixed effects. We find that the person and firm effects are less important in explaining the variance of log wages after correcting for the bias. In the third chapter, I study peer effects at the workplace. I focus on how potential peers determine a worker's location and her future wage profile. I empirically disentangle if workplace peers affect each other through learning or network effects. Similarly to the literature, I document the importance of learning which is more pronounced for the youngest cohorts arguably with no networks. I propose a structural model to understand the mechanism behind learning. The final goal of the model is to quantify the impact of peer learning the firm geographical allocation of workers, and on the rising between firm wage inequality.

Author : Brian Snowdon
Publisher : Routledge
Page : 689 pages
File Size : 28,35 MB
Release : 1997-07-10
Category : Business & Economics
ISBN : 113472909X

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This book brings together a collection of key readings in modern macroeconomics. Each article has been chosen to provide the reader with accessible, non-technical papers which assess the controversies within modern macroeconomics.

Author : Matthew Knowles
Publisher :
Page : 198 pages
File Size : 42,79 MB
Release : 2017
Category : Banks and banking
ISBN :

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"This dissertation consists of three essays concerning the macroeconomic implications of financial market frictions that limit the ability of firms to obtain external finance. Each of the three chapters employs a theoretical macroeconomic model, combined with some empirical analysis, to study unanswered questions in the literature related to the importance of these financial market frictions for the wider economy. The three chapters consider, in turn, the effect of banking crises on investment, output and employment, the implications of financial market frictions for optimal capital taxation, and the effect of banking deregulation on the distribution of income. The first chapter studies the long slumps in output and employment following banking crises. In a panel of OECD and emerging economies, I find that recessions are associated with larger initial drops in investment and more persistent drops in output if they occur simultaneously with banking crises. Furthermore, the banking crises that are followed by more persistent output slumps are associated with particularly large initial drops in investment. I show that these patterns can arise in a model where a financial shock temporarily increases the costs of external finance for investing entrepreneurs. This leads to a drop in investment and a persistent slump in output. Critical to the model is the distinction between different types of capital with different depreciation rates. Intangible capital and equipment have high depreciation rates, leading these stocks to drop substantially when investment falls after a financial shock. If wages display some rigidity, this induces a slump in output and employment that persists for roughly a decade, through the contribution of the decline in equipment and intangibles to declining production and labor demand. I find that this mechanism can account for almost a third of the persistent drop in output and employment in the US Great Recession (2007-2014). In the model, TFP and government spending shocks lead to relatively smaller declines in investment and less persistent drops in output; so the model is also consistent with the more transitory output drops seen after non-financial recessions, where such shocks may have been more important. The second chapter, based on work co-written with Corina Boar, considers the implications of financial market frictions for optimal linear capital taxation, in a setting where the government is concerned with redistribution. By including financial frictions, we emphasize the effect of a new channel affecting the equity-efficiency trade-off of redistribution: taxes affect the allocative efficiency of capital and, ultimately, total factor productivity. We find that high tax rates can be optimal, provided that they are applied to wealth, rather than risky capital. Under plausible parameter values, we find that the optimal tax on risky capital is lower than that on wealth, and roughly in line with current U.S. levels. This suggests welfare gains from taxing wealth at a higher rate than risky capital. The third chapter, based on work co-written with Corina Boar and Yicheng Wang, studies the effect of banking deregulation in the US on the distribution of income, from both a theoretical and empirical perspective. We focus on the effect of the removal of interstate banking and branching restrictions over the 1970-1994 period. We present a theoretical model based on Greenwood and Jovanovic (1990) to illustrate the channels through which this deregulation may affect the income distribution. In the model, income inequality rises after banking deregulation for some values of the parameters--because deregulation decreases the cost of borrowing, which primarily benefits wealthy firm-owners. We empirically estimate the effect of interstate banking and branching deregulation on income inequality by exploiting variations in the timing of deregulation across states. We find that the removal of banking restrictions increased the Gini coefficient by 6 percent in the long run."--Pages ix-xi.

Author : Yicheng Wang
Publisher :
Page : 189 pages
File Size : 23,19 MB
Release : 2015
Category : Business enterprises
ISBN :

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"This thesis contains three chapters. The first chapter investigates whether wage dynamics in long-term employment relationships can help financially constrained firms and mitigate their financial shocks. The second chapter is related to the first chapter, and investigates whether workers' wealth and liquidity conditions have any impacts on the wage dynamics when their employers face financial constraints. The third chapter studies accumulation of firm-specific human capital in the presence of debt market frictions. In chapter 1, I am motivated by the evidence which suggests financially constrained firms may offer lower wages, coupled with faster wage growth. If these constrained firms can tilt wages, cutting current wages in exchange for later increases, this potentially mitigates the impact of financial frictions or shocks. This chapter studies the aggregate implications of this mitigating effect with an application to the 2008 financial crisis. I provide a new, tractable equilibrium model of wage dynamics for heterogeneous firms--some are financially constrained, some not. Risk-neutral firms post optimal long-term wage contracts to attract risk-averse workers through competitive search. When applied to the 2008 financial crisis, the model predicts that small firms, being more likely to be constrained, tend to temporarily cut workers' wages, while for large firms wages are quite smooth and stable. Counterfactual experiments in the model show that the mitigating effect can be important. For instance, if the wages within a contract were more rigid (e.g., by raising workers' risk aversion parameter from 2 to 10), the aggregate output would have been even lower in the crisis by about 2% and the unemployment rate higher by about a third of a percentage point. Lastly, I find that the model has empirical support along several dimensions. The model is consistent with cyclical behavior in wage data (including new hires and job stayers' wage behavior). Its prediction that small firms cut wages much more than large firms is also consistent with micro-level data during the Great Recession. In chapter 2, I investigate whether workers' wealth and liquidity conditions matter for the wage dynamics in long-term employment relationships. The theoretical model in this chapter implies that wealthy workers, or workers with more liquid assets, are able to and willing to take wage adjustments when firms face financial constraints. Empirically, I find mixed evidence for this implication. For instance, among those workers who work at small firms, homeowners, compared to renters, are more likely to have wages cuts and work more hours around 2008-2009. For other measures of workers' assets and liquidity, the evidence is not significant. It is possible to explore this issue further by using richer and more detailed data, and my analysis in this chapter provides a first step toward this direction. Chapter 3 studies research and development (R&D) investment and accumulation of firm-specific knowledge capital (i.e., human capital) in the presence of debt market frictions, highlighting the macroeconomic implications. Empirically, R&D investment and knowledge capital are negatively correlated with debt at the firm level, which is in contrast with the positive relationship between physical investment and firm debt. I propose a new model to account for those facts: Firms accumulate firm-specific knowledge capital through R&D investment. However, knowledge capital-different from physical capital-cannot be used as banking collateral. Firms with high R&D investment opportunities rely more on internal finance and less on external debt. The model is quantitatively consistent with empirical facts along a variety of dimensions. Based on the model, I then study the implications of two industrial policies. A policy that encourages using intellectual property as collateral for bank loans has a small effect. I recommend a policy of tax credits for R&D investment. In fact, the tax credit policy can increase output by more than 3% in the long run."--Pages iv-vi.