The Allocation of Capital and Time Over the Business Cycle

A Beckerian model of household production is developed to study the cyclical allocation of capital and time between market and home activities. The adopted framework treats the business and household sectors symmetrically. In the market, labor interacts with business capital to produce market goods and services, and likewise at home the remaining time (leisure) is combined with household capital to produce home goods and services. The model presented is parameterized and simulated to see whether it can rationalize the observed allocation of capital and time, as well as other stylized facts, for the postwar U.S. economy. I

The allocation of goods and time over the business cycle

A Beckerian model of household production is developed to study the allocation of capital and time between market and home activities over the business cycle. The adopted framework treats the business and household sectors symmetrically. In the market, labor interacts with business capital to produce market goods and services, and likewise at home the remaining time, leisure, is combined with household capital to produce home goods and services. The theoretical model presented is parameterized, calibrated, and simulated to see whether it can rationalize the observed allocation of capital and time, as well as other stylized facts, for the postwar U.S. economy.Consumption (Economics) ; Capital ; Business cycles

The Optimal Tax Treatment of Housing Capital in the Neoclassical Growth Model

In a dynamic setting, housing is both an asset and a consumption good.But should it be taxed like other forms of consumption or like other forms of saving?We consider the optimal taxation of the imputed rent from owner housing within a version of the neoclassical growth model.We find that the optimal tax rate on the imputed rent is quite sensitive to the constraints imposed on the other available tax rates.In general, it is not optimal to tax the imputed rent at the same rate as the business capital income

Inflation, human capital and Tobin's q

A pervasive empirical Önding for the US economy is that ináation is negatively correlated with the normalized market price of capital (Tobinís q) and growth. A dynamic stochastic general equilibrium model of endogenous growth is developed to explain these stylized facts. In this model, human capital is the principal driver of self-sustained growth. Long run comparative statics analysis suggests that ináation diverts scarce time resource to leisure which lowers human capital utilization. This impacts growth adversely and modulates capital adjustment cost downward resulting in a decline in Tobinís q. For the short run, a Tobin e§ect of ináation on growth weakens the negative association between ináation and q

Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment

By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to areas along the German-Czech border, we examine the impact of an exogenous immigration-induced labor supply shock on local wages and employment of natives. On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment. These average effects mask considerable heterogeneity across groups: while younger natives experience larger wage effects, employment responses are particularly pronounced for older natives. This pattern is inconsistent with standard models of immigration but can be accounted for by a model that allows for a larger labor supply elasticity or a higher degree of wage rigidity for older than for young workers. We further show that the employment response is almost entirely driven by diminished inflows of natives into work rather than outflows into other areas or nonemployment, suggesting that "outsiders" shield "insiders" from the increased competition.Christian Dustmann acknowledges funding through the ERC Advanced Grant 323992-DMEA and by the DFG (DU1024/1-1). Jan Stuhler acknowledges funding from the German National Academic Foundation, the Spanish Ministry of Economy and Competitiveness (MDM2014-0431 and ECO2014-55858-P), and the Comunidad de Madrid (MadEco-CM S2015/HUM-3444)

Home Production Technology and Time Allocation: Empirics, Theory, and Implications

We document a set of time use patterns in both time series and cross sections. To explain these facts, we propose and estimate a model of time allocation that emphasizes the role of home production technology. We find it necessary to consider both labor-augmenting technology and total factor productivity in home production. Based on the estimated model, we study the effects of proportional tax and lump-sum transfer on time allocation and labor supply, with the roles of home production technology and wage heterogeneity highlighted

The Embodiment of Intangible Investment Goods: A Q-Theory Approach

Recent empirical findings on firms' expenditure towards the creation and acquisition of knowledge goods, otherwise known as intangibles, suggest that their share in overall investment has grown considerably. Still, intangible investment is rarely present in investment models. In this paper, I extend the q-theory of investment to model explicitly the decision of firms to invest in intangibles. I then use the model to measure the contribution of intangible goods to the overall capital stock in the U.S. The model highlights the embodiment of intangible goods in tangibles and the role of relative price movements in the measurement of the contribution of each type of investment to the overall capital stock. In particular, given that the relative cost of the main input to intangible production, skilled labor, rose substantially in the 80s and 90s, the price of intangibles inherits this rise. As a result, the downward trend in the aggregate investment deflator series reported by national accounts, which accounts only for the presence of tangible investment goods, is found to have a significant downward bias in the 90s. The model also shows that the growth in the overall capital stock from the late-80s until 2000 was driven mainly by an increase in the contribution of intangibles. However, the contribution of intangibles fell consistently after 2000. These results underscore the importance of accounting for the movements in the price of intangibles rather than focusing only on their rising share in overall investment