The Unbalanced Physical Movements of International Trade

The goods produced in developed nations are often of higher quality, advanced technology and better design, hence goods even with little physical mass have higher value than goods produced in developing nations. This means that if the payment is balanced between developed and developing nations, the physical mass must be unbalanced. As a result, developed nations will become increasingly heavier, and the northern hemisphere where developed nations are clustered will also become more and more heavy. The earth will be reshaped like a ice-cream. Using customs data we confirm this conjecture

The Unbalanced Physical Movements of International Trade

The goods produced in developed nations are often of higher quality, advanced technology and better design, hence goods even with little physical mass have higher value than goods produced in developing nations. This means that if the payment is balanced between developed and developing nations, the physical mass must be unbalanced. As a result, developed nations will become increasingly heavier, and the northern hemisphere where developed nations are clustered will also become more and more heavy. The earth will be reshaped like a ice-cream. Using customs data we confirm this conjecture

Essays on the Impact of Commitment on Bargaining and Efficiency

I study the impact commitment ability has on the efficiency of outcomes in bargaining scenarios and games of coordination. In the first two chapters I analyze the impact of commitment ability on two player bargaining scenarios. In particular, the commitment ability of agents is assumed to be the result of a: revoking) cost which they must pay for backing down from a stated demand. In the first chapter these costs are assumed to be common knowledge and increasing in the magnitude of concession. The agents are shown to benefit from facing higher revoking cost functions. Kalai\u27s Proportional Bargaining Solution is shown to be a good approximation of the equilibrium shares when the cost functions are very high. While all equilibria are efficient in this setting, if the agents are uncertain about these costs when they make their demands the possibility of inefficient equilibria arises. I study this scenario in the second chapter, where the goal is to characterize the set of circumstances that lead to inefficient equilibria. I show that, contrary to models of exogenous commitment, if commitment involves an explicit choice of not backing down, uncertainty regarding revoking costs does not necessarily result in inefficiency: disagreement). If the revoking costs are highly positively correlated across players there can be no disagreement. Even when the revoking costs are independent across players, disagreement cannot arise if the distributions FOSD the uniform distribution. The third chapter considers commitment possibilities in general two player normal form games. Before playing a strategic game, players can commit to not playing some actions at some arbitrarily small cost, progressively shrinking their choice sets. It is shown that if the strategic game is a pure coordination game, the players can avoid all the inefficient Nash Equilibria if they have the ability to commit to not commit. Indeed the unique subgame perfect equilibrium outcome is the Pareto dominant outcome

Essays on Credit and the Labor Market

This dissertation consists of three essays on credit and the labor market. The first essays studies the aggregate, business cycle relationship between consumer credit and unemployment. Using micro-level data I show there is a consistent negative effect of unemployment on both a household's use of and access to consumer credit. I find that upon job loss, households increase applications for credit, get denied more frequently, and experience significant reductions in both debt outstanding and average monthly charges. I interpret these effects as an increase in credit constraints for the unemployed and examine how this relationship impacts macroeconomic variables over the business cycle. To do so, I extend the canonical Mortensen and Pissarides (1994) model of unemployment to include a goods market with search and financial frictions. Households have limited commitment in repaying debt and face borrowing constraints that are disciplined by the ability of lenders to enforce financial contracts. The model predicts that job loss is followed by a contraction in borrowing constraints. In the aggregate, this channel leads to a strategic complementarity between (un)employment and firm hiring incentives as a higher fraction of unemployed consumers decreases the expected revenue from a labor match. I calibrate the model to match the estimated fall in credit upon job loss and examine how these individual unemployment-related credit shocks affect aggregate business cycles. I examine the response of unemployment to aggregate productivity and financial shocks. I find that productivity shocks do a poor job of generating the co-movement of credit and unemployment we observe in the data. However, I find that aggregate financial shocks contribute significantly to the observed dynamics of both real and financial variables.The second essay, co-authored with Guillaume Rocheteau and Peter Rupert, studies the long-term, aggregate relationship between consumer credit and unemployment. The model is similar to that developed in Chapter 1, however, we depart from the assumption that households' borrowing constraints are driven by an enforcement technology and instead allow enforcement to arise endogenously based on lenders' ability to monitor household repayment. As a result borrowing limits are endogenous and depend on the sophistication of the financial system, the frequency of liquidity shocks, and the rate of return on (partially) liquidassets that households can accumulate for self insurance. Moreover, firms'expected productivity is endogenous and depends on firms' market power inthe goods market and the availability of unsecured credit to consumers. As aresult of the complementarity between credit and labor markets, multiplesteady states might exist. Across steady states unemployment and debt limitsare negatively correlated. We calibrate the model to the U.S. labor and credit marketsand illustrate the effects of an expansion in unsecured debtsimilar to that seen in the U.S. from 1978 to 2008. Under the baselinecalibration, the rise in unsecured credit can account for approximately three quarters of the decline in the long-term average unemployment rate.The third essay, co-authored with Tai-Wei Hu and Guillaume Rocheteau, studies the set of equilibria in a pure credit economy with limited commitment and endogenous debt limits, similar to that studied in Chapter 2. We show that the set of equilibria derived under"not-too-tight" solvency constraints, as in Chapter 2, is of measure zero in the whole set of Perfect Bayesian Equilibria.There exist a continuum of endogenous credit cycles of any periodicity and acontinuum of sunspot equilibria, irrespective of the assumed tradingmechanism. Moreover, any equilibrium allocation of the correspondingmonetary economy is an equilibrium allocation of the pure credit economy butthe reverse is not true. On the normative side, we establish conditionsunder which constrained-efficient allocations cannot be implemented with"not-too-tight" solvency constraints