Imperfect Information and the Meltzer-Richard Hypothesis

Despite a strong theoretical prediction that income skewness and redistribution should be positively linked, empirical evidence on this issue is mixed. This paper argues that it is important to distinguish between sources of changes in income skewness. Two sources of such changes are discussed: rising polarization and upward mobility, which both increase income skewness. Under imperfect information, these developments affect redistribution in different ways. While rising polarization increases redistribution, upward mobility can have the opposite effect. Reasonable degrees of informational imperfection are sufficient to generate increasing income skewness and decreasing redistribution in the presence of upward mobility.Voting; redistribution; imperfect information

Inattentive Voters and Welfare-State Persistence

Welfare-state measures often tend to persist even when they seem to have become suboptimal due to changes in the economic environment. This paper proposes an information-based explanation for the persistence of the welfare state. I present a structural model where rationally inattentive voters decide upon implementations and removals of social insurance. In this model, welfare-state persistence arises from disincentive effects of social insurance on attentiveness. The welfare state crowds out private financial precautions and with it agents‘ attentiveness to changes in economic fundamentals. When welfare-state arrangements are pronounced, agents realize changes in economic fundamentals later and reforms have considerable delays.Welfare state; voting; imperfect information

Sticky Prices vs. Sticky Information – A Cross-Country Study of Inflation Dynamics

This paper empirically compares sticky-price and sticky-information Phillips curves considering inflation dynamics in six countries (US, UK, Germany, France, Canada, and Japan). We evaluate the models‘ abilities to match empirical second moments of inflation. Under baseline calibrations, the two models perform similarly in almost all countries. Under estimated parametrizations, sticky information performs better in France while sticky prices dominate in the UK and Germany. Sticky prices match unconditional moments of inflation dynamics better while sticky information is more successful in matching co-movement of inflation with demand. Both models‘ performances worsen where inflation dynamics diff er from the US benchmark.Phillips curve; sticky information; sticky prices

Assortative Mating and Female Labor Supply

This paper investigates the pattern of wives' hours disaggregated by the husband's wage decile. In the US, this pattern has changed from downward-sloping to hump-shaped. We show that this development can be explained within a standard household model of labor supply when taking into account trends in assortative mating. We develop a model in which assortative mating determines the wage ratios within individual couples and thus the efficient time allocation of spouses. The economy-wide pattern of wives’ hours by the husband's wage is downward-sloping for low degrees, hump-shaped for medium degrees, and upward-sloping for high degrees of assortative mating. A quantitative analysis of our model suggests that changes in the gender wage gap are responsible for the overall increase in hours worked by wives. By contrast, the fact that wives married to high-wage men experienced the most pronounced increase is a result of trends in assortative mating.female labor supply, assortative mating, gender wage gap

Household Labor Supply and Home Services in a General-Equilibrium Model with Heterogeneous Agents

We propose a new explanation for differences and changes in labor supply by gender and marital status, and in particular for the increase in married women’s labor supply over time.We argue that this increase as well as the relative constancy of other groups’ hours are optimal reactions to outsourcing labor in home production becoming more attractive to households over time.To investigate this hypothesis,we incorporate heterogeneous agents into a household model of labor supply and allow agents to trade home labor. This model can generate the observed patterns in US labor supply by gender and marital status as a reaction to declining frictions on the market for home services.We provide an accounting exercise to highlight the role of alternative explanations for the rise in hours in a model where home labor is tradable.Labor supply, gender, home production, heterogeneity

Household Labor Supply and Home Services in a General-Equilibrium Model with Heterogeneous Agents

We propose a new explanation for differences and changes in labor supply by gender and marital status, and in particular for the increase in married women's labor supply over time. We argue that this increase as well as the relative constancy of other groups' hours are optimal reactions to outsourcing labor in home production becoming more attractive to households over time. To investigate this hypothesis, we incorporate heterogeneous agents into a household model of labor supply and allow agents to trade home labor. This model can generate the observed patterns in US labor supply by gender and marital status as a reaction to declining frictions on the market for home services. We provide an accounting exercise to highlight the role of alternative explanations for the rise in hours in a model where home labor is tradable.labor supply, gender, home production, heterogeneity

Household specialization and the labor-supply elasticities of women and men

This paper studies gender differences in the elasticity of labor supply in a model of household specialization. We show that household specialization implies larger Frisch elasticities for the partner that specializes in home production. Quantitatively, empirical time-use ratios alone imply differences in the Frisch elasticity between women and men of about 50%. Similar results are obtained for long-run elasticities. However, limited commitment within the household reduces the gender differences in long-run labor-supply elasticities. Our results imply that the elasticity of labor supply is not a deep parameter but can react on, e.g., gender-biased employment subsidies, public child care provision, and divorce laws

Inattentive voters and welfare-state persistence

Welfare-state measures often tend to persist even when they seem to have become suboptimal due to changes in the economic environment. This paper proposes an information-based explanation for this welfare-state persistence. I present a structural model where rationally inattentive voters decide upon implementations and removals of social insurance. In this model, welfare- state persistence arises from disincentive effects of social insurance on attentiveness. The welfare state crowds out private financial precautions and with it agents' attentiveness to changes in economic fundamentals. When welfare-state arrangements are pronounced, agents realize changes in economic fundamentals later and reforms have considerable delays

Sticky prices vs. sticky information

This paper compares sticky-price and sticky-information Phillips curves empirically considering inflation dynamics in eleven countries (the G7 and Scandinavia). We evaluate the models` abilities to match empirical second moments of inflation. Although overall model performance is similar, there is a strong systematic pattern in model performance by moment type. Sticky prices match unconditional moments of inflation dynamics clearly better while sticky information is considerably more successful in matching co-movements of inflation with demand

The employment dynamics of different population groups over the business cycle

We use Bayesian VARs to analyze differences in employment dynamics across population groups in the US. The employment of males, young people, non-whites, the less educated, and workers in blue-collar occupations fluctuates more heavily. We further document across-group differences in the timing of employment reactions to business-cycle shocks. Groups with stronger fluctuations are affected early in the transmission process. Furthermore, we disentangle between the effects of different shocks. Supply shocks primarily drive differences between occupations, genders, age groups, and education groups. Demand shocks are important for the dynamics of employment ratios between races and ethnic origins