Phillips curves, monetary policy, and a labor market transmission mechanism

This paper develops a general equilibrium monetary model with performance incentives to study the inflation-unemployment relationship. A long-run downward-sloping Phillips curve can exist with perfectly anticipated inflation because workers’ incentive to exert effort depend on financial market returns. Consequently, higher inflation rates can reduce wages and stimulate employment. An upward-sloping or vertical Phillips Curve can arise instead, depending on agents’ risk aversion and the possibility of capital formation. Welfare might be higher away from the Friedman rule and with a central bank putting some weight on employment.Phillips curve ; Labor market ; Monetary policy ; Wages

Knowledge Exchange, Matching, and Agglomeration

Despite wide recognition of their significant role in explaining sustained grwoth and economic development, uncompensated knowledge spillovers have not yet been fully modeled with a microeconomic foundation. The main purpose of this paper is to illustrate the creation of knowledge as well as its consequences for agglomerative activity in a general-equilibrium search-theoretic framework. Agents, possessing differentiated types of knowledge, search for partners to exchange ideas and create new knowledge in order to improve production efficacy. When individuals' types of knowledge are too diverse, a match is less likely to generate significant innovations. We demonstrate that the extent of agglomeration has significant implications for the patterns of information flows in economies. Further, by simultaneously determining the patterns of knowledge exchange and the spatial agglomeration of an economy we identify additional channels for interaction between agglomerative activity and knowledge exchange. Finally, contrary to previous work on spatial agglomeration, our model suggests that agglomerative environments may be either under-specialized and under-populated or over-specialized and over-populated relative to the social optimum.

Knowledge exchange, matching, and agglomeration

Despite wide recognition of their significant role in explaining sustained growth and economic development, uncompensated knowledge spillovers have not yet been fully modeled with a microeconomic foundation. The main purpose of this paper is to illustrate the exchange of knowledge as well as its consequences on agglomerative activity in a general-equilibrium search-theoretic framework. Agents, possessing differentiated types of knowledge, search for partners to exchange ideas and create new knowledge in order to improve production efficacy. When individuals’ types of knowledge are too diverse, a match is less likely to generate significant innovations. We demonstrate the extent of agglomeration has significant implications for the patterns of information flows in economies. Further, by simultaneously determining the patterns of knowledge exchange and the spatial agglomeration of an economy we identify additional channels for interaction between agglomerative activity and knowledge exchange. Finally, contrary to previous work in spatial agglomeration, our model suggests that agglomerative environments may be either under-specialized and under-populated or over-specialized and over-populated relative to the social optimum.Econometric models

Knowledge Exchange, Matching, and Agglomeration

Despite wide recognition of their significant role in explaining sustained growth and economic development, uncompensated knowledge spillovers have not yet been fully modeled with a microeconomic foundation. This paper illustrates the exchange of knowledge as well as its consequences for agglomerative activity in a general-equilibrium search-theoretic framework. Agents, possessing differentiated types of knowledge, search for partners to exchange ideas in order to improve production efficacy. When individuals’ types of knowledge are too diverse, a match is less likely to generate significant innovations. We demonstrate that the extent of agglomeration has significant implications for the patterns of information flows in economies. By simultaneously determining the patterns of knowledge exchange and the population agglomeration of an economy, we identify additional channels for interaction between agglomerative activity and knowledge exchange. The main implications of the model are a negative correlation between city population and diversity of knowledge exchange and a positive correlation between city population and per capita knowledge or patent output. Contrary to previous work in urban economics and growth theory, it is possible that a decentralized equilibrium is under-populated or over-populated and under-selective or over-selective in knowledge exchange, compared to the social optimum. By allowing for perpetual knowledge accumulation, we find that population agglomeration is generally accompanied by higher growth. The main findings remain qualitatively unchanged even if we allow individual knowledge types to change over time, though the creation of new types of knowledge may result in multiple equilibria.Matching, Knowledge Exchange and Spillovers, Agglomerative Activity

Knowledge Exchange, Matching, and Agglomeration

Despite wide recognition of their significant role in explaining sustained growth and economic development, uncompensated knowledge spillovers have not yet been fully modeled with a microeconomic foundation. This paper illustrates the exchange of knowledge as well as its consequences for agglomerative activity in a general-equilibrium search-theoretic framework. Agents, possessing differentiated types of knowledge, search for partners to exchange ideas in order to improve production efficacy. Contrary to previous work, we demonstrate that a decentralized equilibrium may be under-populated or over-populated and under-selective or over-selective in knowledge exchange, compared to the social optimum.matching, knowledge exchange and spillovers, agglomerative activity

Labor Market Search and Optimal Retirement Policy

A popular view about social security, dating back to its early days of inception, is that it is a means for young, unemployed workers to 'purchase' jobs from older, employed workers. The question we ask is: Can social security, by encouraging retirement and hence creating job vacancies for the young, improve the allocation of workers to jobs in the labor market? Using a standard model of labor market search, we establish that the equilibrium with no policy-induced retirement can be efficient. Even under worst-case parameterizations of our model, we find that public retirement programs pay the elderly substantially more than labor market search theory implies that their jobs are worth. An important effect, ignored by the popular view, is that the creation of a vacant job by a retirement reduces the value of other vacant jobs.

Housing wealth and wage bargaining

We examine the relationship between housing equity and wage earnings. We first provide a simple model of wage bargaining where failure leads to both job loss and mortgage default. Moreover, foreclosure generates disutility beyond selling a home. We test this prediction using nine waves of the national American Housing Survey. Employing a rich set of time and place controls, individual fixed effects, and an instrumental variable strategy, we find that people with an underwater mortgage command a significantly lower wage than other homeowners. This finding survives a number of robustness checks. We also include other determinants of house lock such as a favorable mortgage interest rate relative to the current rate and a capped property tax assessment, but we do not find these factors lower earnings. We conclude that negative equity matters because default is unpleasant or costly, not because it precludes an out-of-state job search

CONSUMER KNOWLEDGE OF SELECTED NUTRIENT CONTENT OF NINE FRESH MEAT CUTS

The U.S. Department of Agriculture, the Food and Drug Administration, and the medical profession, among others, have attempted to broaden consumers' knowledge of the nutritive content of foods. Retailers provide information by supplying point-of-purchase nutrition information and/or nutrition labels on fresh meats. The availability of nutrition information on packaged fresh meats is relatively new. A survey of Louisiana households provided estimates of their knowledge of the fat, cholesterol, and protein content of selected combinations of fresh beef, pork, chicken, and turkey meats. Permutation analysis and tabular analyses were used to assess households' nutrition knowledge of the selected fresh meats.beef, chicken, consumer knowledge, nutrient content, permutation analysis, pork, turkey, Food Consumption/Nutrition/Food Safety,