Essays On Household Heterogeneity In Macroeconomics
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Essays On Household Heterogeneity In Macroeconomics
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Author : Lukas Nord
language : en
Publisher:
Release Date : 2023
Essays On Household Heterogeneity In Macroeconomics written by Lukas Nord and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with Households categories.
This thesis contains four independent essays studying the consequences of household heterogeneity for Macroeconomics. The first chapter studies the implications of household heterogeneity for equilibrium prices. I break with the canonical assumptions of homothetic preferences and the law of one price to show how heterogeneity in consumption baskets and search for price bargains affects posted prices. Analytical results from search theory and empirical evidence from big data on households' grocery transactions show that price distributions respond to the composition of buyers. In a quantitative heterogeneous agent model with endogenous price dispersion for multiple varieties, I find that the response of retailers to households' search effort is quantitatively important to differentiate between inequality in expenditure and consumption. It more than doubles the direct effect of paying more or less given posted prices, which has been the focus of previous literature. Furthermore, I find that household heterogeneity helps to account for the empirical cyclicality of retail prices and markups in response to aggregate shocks, and has implications for the response of prices to redistributive policies. In the second chapter, which is joint work with Annika Bacher and Philipp Grübener, we show how households with two members can insure themselves against the job loss of a primary earner through the labor force entry of a nonparticipating spouse. We document empirically that this margin is predominantly used by young households. In a two-member life cycle model with endogenous arrival rates, human capital accumulation, and extensive-margin labor supply, we explore how differences in labor market opportunities and asset holdings contribute to this pattern. Our findings suggest that the age difference is predominantly explained by better insurance through asset holdings for the old, while differences in arrival rates and human capital play a smaller role. In the third chapter, which is joint work with Caterina Mendicino and Marcel Peruffo, we study differences in the exposure to bank distress along the income distribution. We develop a two-asset heterogeneous agent model with a financial sector and use this framework to show that banking sector losses disproportionately harm low-income households while rich households adjust their savings behavior to profit from fluctuations in asset prices. This is why welfare losses from bank distress are considerably more dispersed than consumption responses. We find the model-implied consumption responses to be in line with empirical evidence on the relationship between bank equity returns and consumption across households. In the forth chapter, I study how wealth holdings can affect households' incentives to form precise expectations about future inflation rates. I document empirically how the dispersion of expectations changes along the wealth distribution and develop a consumption-savings model with costly expectation formation to study implications for the effectiveness of forward guidance policies. I show endogenous expectation formation to significantly lower the effectiveness of forward guidance policies due to selection in which households are paying attention to news about inflation.
Essays On Macroeconomics And Household Heterogeneity
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Author : Isaac Gross
language : en
Publisher:
Release Date : 2018
Essays On Macroeconomics And Household Heterogeneity written by Isaac Gross and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Macroeconomics categories.
Three Essays On Household Heterogeneity And Macroeconomic Dynamics
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Author : Julia Isabelle Otten
language : en
Publisher:
Release Date : 2021
Three Essays On Household Heterogeneity And Macroeconomic Dynamics written by Julia Isabelle Otten and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Dynamics categories.
Essays In Macroeconomics And The Role Of Household Heterogeneity In The Great Recession
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Author : Kieran P. Larkin
language : en
Publisher:
Release Date : 2019
Essays In Macroeconomics And The Role Of Household Heterogeneity In The Great Recession written by Kieran P. Larkin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This thesis studies the role that household heterogeneity plays in macroeconomic dynamics. It tackles this topic by focusing on consumption behaviour during the Great Recession. Its overarching argument is threefold: Firstly, that heterogeneity is crucial for understanding the patterns observed in the data. Secondly, that the state of the economy and preceding environment has a first order impact on how the economy responds to shocks. Thirdly, inaction and illiquidity matter and by focusing on this margin we can gain a better understanding of consumer behaviour. In the three chapters I consider the role that labor market sorting, household portfolio choice, shocks to the availability of credit, and changes in the future path of expected income played in understanding the Great Recession. The first chapter investigates the role that labor market tranquillity prior to the Great Recession played in the magnitude of the subsequent consumption decline. It highlights the interaction between labor market sorting and the household portfolio choice in the determination of the economy"s response to shocks. The second chapter looks at the role of credit conditions in household consumption dynamics. It argues that much of the literature has misunderstood the effect of a decline in credit availability during the Great Recession. It instead emphasizes the inaction response generated due to a tightening of the collateral constraint, which provides a better account of the Great Recession and of the borrowing behaviour of households in the micro data. The final chapter focuses on the car market and car purchasing behaviour during the last three US recessions, documenting important unusual features of the consumption response during the Great Recession. It uses these responses as an identification mechanism to uncover the importance of the shocks hitting the economy during the crisis, finding an important role for asset price shocks and a decline in the expected growth rate of household incomes in replicating the consumption dynamics.
Essays On Macroeconomic Policies And Household Heterogeneity
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Author : Gergő Motyovszki
language : en
Publisher:
Release Date : 2021
Essays On Macroeconomic Policies And Household Heterogeneity written by Gergő Motyovszki and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Macroeconomics categories.
This thesis is composed of three independent chapters, but all centered around the broader topic of how macroeconomic policies interact with various aspects of household heterogeneity. Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high and less-skilled workers. In particular, this effect is prominent in sectors intensive in less-skilled labor, that exhibit high degree of capital-skill complementarity (CSC) and are subject to matching inefficiencies. To rationalize these findings we build a New Keynesian DSGE model with asymmetric search and matching (SAM) frictions across the two types of workers and CSC in the production function. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel. Monetary-Fiscal Interactions and Redistribution in Small Open Economies Ballooning public debts in the wake of the covid-19 pandemic can present monetary-fiscal policies with a dilemma if and when neutral real interest rates rise, which might arrive sooner in emerging markets: policymakers can stabilize debts either by relying on fiscal adjustments (AM-PF) or by tolerating higher inflation (PM-AF). The choice between these policy mixes affects the efficacy of the fiscal expansion already today and can interact with the distributive properties of the stimulus across heterogeneous households. To study this, I build a two agent New Keynesian (TANK) small open economy model with monetary-fiscal interactions. Targeting fiscal transfers more towards high-MPC agents increases the output multiplier of a fiscal stimulus, while raising the degree of deficitfinancing for these transfers also helps. However, precise targeting is much more important under the AM-PF regime than the question of financing, while the opposite is the case with a PM-AF policy mix: then deficit-spending is crucial for the size of the multiplier, and targeting matters less. Under the PM-AF regime fiscal stimulus entails a real exchange rate depreciation which might offset "import leakage" by stimulating net exports, if the share of hand-to-mouth households is low and trade is price elastic enough. Therefore, a PM-AF policy mix might break the Mundell-Fleming prediction that open economies have smaller fiscal multipliers relative to closed economies. Weak Wage Recovery and Precautionary Motives after a Credit Crunch During the economic recovery following the financial crisis many advanced economies saw subdued wage dynamics, in spite of falling unemployment and an increasingly tight labour market. We propose a mechanism which can account for this puzzle and work against usual aggregate demand channels. In a heterogeneous agent model with incomplete markets we endogenize uninsurable idiosyncratic risk through search-and-matching (SAM) frictions in the labour market. In this setting, apart from the usual precautionary saving behaviour, households can self-insure also by settling for lower wages in order to secure a job and thereby avoid becoming borrowing constrained. This channel is especially pronounced for asset-poor agents, already close to the constraint. We introduce a credit crunch into this framework modelled as a gradual tightening of the borrowing constraint (and utilizing a continuous time approach, known as HACT). The perfect foresight transition dynamics feature falling wages despite a tightening labour market and expanding employment. As households suddenly find themselves closer to the borrowing constraint, the increased precautionary motive drives them to accept lower wages in the bargaining process, while firms respond to this by posting more vacancies, leading to a tighter labour market and falling unemployment. If the household deleveraging pressure is persistent enough after the credit crunch, it can explain the weak wage recovery in spite of already stronger aggregate demand.
Essays On Macroeconomics With Heterogeneity And Inequality
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Author : Zhigang Ge
language : en
Publisher:
Release Date : 2020
Essays On Macroeconomics With Heterogeneity And Inequality written by Zhigang Ge and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
Abstract Chapter 1. Heterogeneous Entrepreneurial Ability and Wealth Inequality Models with entrepreneurship can reproduce high wealth concentration at the top. The key assumption is the borrowing constraint, that is, households are unable to borrow enough assets to start a business or invest optimally in the business. However, some empirical evidences show that borrowing constraint does not matter for the majority of households in the US. This paper seeks to generate high wealth concentration at the top without assuming borrowing constraint. The baseline model that introduces heterogeneity in entrepreneurial ability is able to match the wealth distribution while the model assuming same entrepreneurial ability fails. Besides wealth distribution, the baseline model generates other moments that are consistent with the data. Chapter 2. Taxing Top Earners: The Role of Entrepreneurs This paper studies the optimal top marginal income tax rate in a quantitative framework with entrepreneurial choice, financing constraints, and realistic earnings and wealth distributions. I find that the revenue-maximizing top tax rate is approximately 41 percent -- close to the recent levels in the US. In contrast, when calibrated with only workers to match realistic earnings and wealth distributions, the model predicts a revenue-maximizing top tax rate of 81 percent -- close to the established view. There are two channels through which the baseline model has a lower revenue-maximizing top tax rate. First, the wealth distribution channel: increasing the top tax rate decreases wealth accumulation and leads to a less skewed wealth distribution in the long run (there are more top entrepreneurs with low wealth and less top entrepreneurs with high wealth). With financing constraints, there is a similar change in the business earnings distribution, implying a fall in the average business earnings at the top. Second, the general equilibrium effect on labor earnings of workers: in the model with entrepreneurs, increasing the top tax rate reduces the capital stock much more than labor supply, which decreases the capital-labor ratio and thus the equilibrium wage rate in the model economy. Finally, I find that the welfare-maximizing top marginal income tax rate is close to the revenue-maximizing one. Chapter 3. Household Heterogeneity and Consumption Amplification Macroeconomic models with household heterogeneity in wealth can generate larger consumption response to aggregate shocks compared to a representative-agent economy. In other words, there is consumption amplification associated with wealth heterogeneity. However, I find that in a Krusell-Smith type real business cycle (RBC) model, this amplification effect is only significant at the onset of a recession and gradually dies out as the recession proceeds. The finding is of interest because part of the motivation for the widely adoption of models with wealth heterogeneity is their different and empirically plausible implications for consumption dynamics compared with representative-agent models. I then introduce household heterogeneity in housing and find that the model with housing has more persistent amplification effect on consumption during the recession.
Essays In Quantitative Macroeconomics Business Cycles Household Heterogeneity And Model Advancements
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Author : Ekaterina Shabalina
language : en
Publisher:
Release Date : 2023
Essays In Quantitative Macroeconomics Business Cycles Household Heterogeneity And Model Advancements written by Ekaterina Shabalina and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
Essays On Agent Heterogeneity In Macroeconomics
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Author : Jose Luis Luna Alpizar
language : en
Publisher:
Release Date : 2016
Essays On Agent Heterogeneity In Macroeconomics written by Jose Luis Luna Alpizar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Heterogeneous agents models have become the norm in modern macroeconomics as the limitations of the representative-agent paradigm and the importance of studying household heterogeneity grow in recognition. Agent heterogeneity may not only be important to accurately capture the description of an aggregate equilibrium. Also, the representative agent assumption may hide many distributional effects and therefore could change the answer to many normative questions usually given by representative agent models.This dissertation contains three chapters exemplifying ways in which the consideration of heterogeneous agents in the modelling of macroeconomic phenomena has important repercussions for the predictions of the model and its normative implications. Chapters 1 and 2 show the importance of accounting for worker heterogeneity in the analysis of labor markets. Chapter 1 presents a search and matching model of unemployment with heterogeneous workers which's main features, are ex-ante worker heterogeneity and undirected search. These features enable the model to replicate the empirical correlations between labor market outcomes and proxy variables for worker productivity. The model displays job rationing, which makes it useful to understand the high levels of unemployment observed in deep recessions. It also constitutes a versatile tool for the analysis of several labor-market aspects in which worker heterogeneity could play an important role, such as the impact of employment policies that are believed to have asymmetric effects across the labor force.Chapter 2 provides an example of such applications by analyzing the effects of increments of a minimum wage. It explores theoretically and empirically the notion that minimum wages affect low-skill workers asymmetrically due to productivity differences. Using the model presented in chapter 1, with the incorporation of endogenous search intensity to account for the effects that minimum wages could have on worker participation, I show that a rising minimum wage lowers the employment and labor force participation of low-productivity workers by pricing them out of the market, while it increases the employment, participation, and wages of more productive workers that remain hirable. Chapter 2 also contains an empirical analysis that investigates and ultimately validates the model's predictions of changes in the minimum wage. Within the labor market for low-education (high school or lower) workers, increments in the minimum wage have diametrically opposed effects: they reduce the employment and labor force participation of teenagers with less than high school education, while increasing the employment and labor force participation of mature workers with high school educational attainment. A calibrated version of the model targeting the low-education labor market shows that, despite its opposite effects across the labor force, an increase in the minimum wage negatively impacts aggregate employment, labor force participation, and social welfare.Chapter 3 investigates the existence of complex dynamics in the behavior of exchange rates due heterogeneity in the expectations of their future value. A simple model of exchange rate dynamics featuring traders with heterogeneous expectations is introduced. The model is based on the asset pricing model in Brock and Hommes (1998) and features the BNN dynamic presented in Brown et al. (1950), a dynamic with desirable properties absent in other dynamics used in the literature. The chapter shows that even this simple model can easily generate complex and even chaotic dynamics in the exchange rate because of the interaction of traders with different beliefs. An important implication is that long-term exchange rate prediction is, in theory, difficult.
Essays In Public And Environmental Economics Household Heterogeneity And The Distributional Effects Of Climate Policy
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Author : Giacomo Schwarz
language : en
Publisher:
Release Date : 2016
Essays In Public And Environmental Economics Household Heterogeneity And The Distributional Effects Of Climate Policy written by Giacomo Schwarz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Essays In Heterogeneity In Macroeconomics
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Author : Minsu Chang
language : en
Publisher:
Release Date : 2019
Essays In Heterogeneity In Macroeconomics written by Minsu Chang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This dissertation consists of two chapters that explore how micro-level heterogeneity helps us understand the dynamics of macroeconomic variables. Chapter 2 shows that the evolving likelihood of marriage and divorce is an essential factor in accounting for the changes in housing decisions over time in the United States. I build and estimate a life-cycle model of single and married households who face exogenous age-dependent marital transition shocks and then conduct a decomposition analysis between 1970 and 1995. The results show that household formation shocks could account for about 30% of the increase in the single's homeownership rate and play a crucial role in generating the observed sign of change in portfolio share of married households. The extended analysis on recent years after 1995 shows that the continuing decrease in marriage prospects contributed to push up the single's homeownership rate during the housing boom in the mid 2000s. Chapter 3 develops a state-space model with a state-transition equation that takes the form of a functional vector autoregression and stacks macroeconomic aggregates and a cross-sectional density. The measurement equation captures the error in estimating log densities from repeated cross-sectional samples. The log densities and the transition kernels in the law of motion of the states are approximated by sieves, which leads to a finite-dimensional representation in terms of macroeconomic aggregates and sieve coefficents. We illustrate how the model works based on the simulation of the Krusell-Smith economy and conduct an empirical analysis on the joint dynamics of technology shocks, per capita GDP, employment rates, and the earnings distribution.