277 research outputs found

    The young, the old, and the restless: demographics and business cycle volatility

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    We investigate the consequences of demographic change for business cycle analysis. We find that changes in the age composition of the labor force account for a significant fraction of the variation in business cycle volatility observed in the U.S. and other G7 economies. During the postwar period, these countries experienced dramatic demographic change, although details regarding extent and timing differ from place to place. Using panel-data methods, we exploit this variation to show that the age composition of the workforce has a large and statistically significant effect on cyclical volatility. We conclude by relating these findings to the recent decline in U.S. business cycle volatility. Using both simple accounting exercises and a quantitative general equilibrium model, we find that demographic change accounts for a significant part of this moderation.Business cycles - Econometric models ; Demography

    Job polarization and jobless recoveries

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    Job polarization refers to the shrinking share of employment in middle-skill, routine occupations experienced over the past 35 years. Jobless recoveries refers to the slow rebound in aggregate employment following recent recessions despite recoveries in aggregate output. We show how these two phenomena are related. First, essentially all employment loss in routine occupations occurs in economic downturns. Second, jobless recoveries in the aggregate can be accounted for by jobless recoveries in the routine occupations that are disappearing

    The Young, the Old, and the Restless: Demographics and Business Cycle Volatility

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    We investigate the consequences of demographic change for business cycle analysis. We find that changes in the age composition of the labor force account for a significant fraction of the variation in business cycle volatility observed in the U.S. and other G7 economies. During the postwar period, these countries experienced dramatic demographic change, although details regarding timing and nature differ from place to place. Using panel-data methods, we exploit this variation to show that the age composition of the workforce has a large and statistically significant effect on cyclical volatility. We conclude by relating these findings to the recent decline in U.S. business cycle volatility. Through simple quantitative accounting exercises, we find that demographic change accounts for approximately one-fifth to one-third of this moderation.

    Three essays on financial development, inequality, and growth.

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    This thesis presents three papers that to contribute to our theoretical knowledge on economic growth and secular stagnation. Chapter 2 (which constituted my Job Market paper) presents a theory in which economic development manifests itself primarily as a process of sectoral differentiation. As the variety of sectors expands, the allocation of heterogeneously talented individuals improves. The paper shows that, in addition to increasing the average productivity of the matches between agents and sectors, this process also mitigates informational frictions affecting the functioning of financial markets. The positive impact of sectoral variety on the efficiency of financial markets gives rise to a novel feedback between financial development and horizontal innovations, which may yield different types of dynamics. A successful economy typically exhibits a continuous increase in the variety of productive activities, which in turn leads to lower frictions in the financial markets. However, a poverty-trap may also arise. This situation is characterised by a rudimentary productive structure with poor matching of skills to activities, and where the operation of financial markets is severely affected by the talent mismatching. Chapter 3 proposes a theory of insurance market imperfections along the path of development based on the endogenous emergence of informational asymmetries during development. The source of the in efficiency in the insurance market is private information regarding entrepreneurial skills. Development is driven by the action of the entrepreneurs, and materialises when the agents best suited for under taking entrepreneurial activities fully exercise their skills. Yet, due to private information, an adverse selection problem endogenously arises when the prospective entrepreneurs intend to diversify away their idiosyncratic risks. The adverse selection problem prevents the provision of first-best insurance contracts against entrepreneurial risks, which may discourage entrepreneurial investment and halt, the process of development. Chapter 4 (written in collaboration with Vincenzo Merella, from Birkbeck College) turns the attention towards a world economy. The past literature on trade has explored conditions under which international trade might be a factor magnifying income disparities between the advanced North and the backward South. No attention has yet been placed on the effect of trade on countries that do not display substantial dissimilarities concerning capital endowments and income per head. The paper shows that even when no single country is technologically more advanced than any other one and productivity changes are uniform and identical in all countries, international trade may still be the source of income divergence. Divergence will be experienced when comparative advantages induce patterns of specialisation that, although optimal for each country at some initial point in time, do not offer the same scope for improvements in terms of subsequent quality upgrading of final products

    The Demand for Youth: Implications for the Hours Volatility Puzzle

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    The employment and hours worked of young individuals fluctuate much more over the business cycle than those of prime-aged individuals. Understanding the mechanism underlying this observation is key to explaining the volatility of aggregate hours over the cycle. We argue that the joint behavior of age-specific hours and wages in the U.S. data point to differences in the cyclical characteristics of labor demand. To articulate this view, we consider a production technology displaying capital-experience complementarity. We estimate the key parameters governing the degree of complementarity and show that the model can account for the behavior of age-specific hours and wages while generating a series of aggregate hours that is nearly as volatile as output.

    Disappearing routine jobs: Who, how, and why?

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    We study the deterioration of employment in middle-wage, routine occupations in the United States in the last 35 years. The decline is primarily driven by changes in the propen- sity to work in routine jobs for individuals from a small set of demographic groups. These same groups account for a substantial fraction of both the increase in non-employment and employment in low-wage, non-routine manual occupations observed during the same period. We analyze a general neoclassical model of the labor market featuring endogenous participation and occupation choice. In response to an increase in automation technology, the framework embodies a tradeoffbetween reallocating employment across occupations and reallocation of workers towards non-employment. Quantitatively, we find that this standard model accounts for a relatively small portion of the joint decline in routine em- ployment and associated rise in non-routine manual employment and non-employment
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