Macroeconomic models with heterogeneous agents and housing

The housing sector’s important role in the U.S. economy is hard to miss: Real estate held in household portfolios in 2004 was worth $17 trillion, and the mortgage market now totals more than$7.5 trillion. ; To understand how this sector and related government policies affect households and the economy, economists attempt to incorporate housing and housing finance into heterogeneous agent models—macroeconomic models that capture the economic and demographic diversity among households. This article provides a progress report on this line of research via a discussion of four papers, presented at an Atlanta Fed conference in May 2005, that use such models. ; The author first presents microlevel data on income, real estate, and mortgage debt across the population. He then outlines a generic model with housing that incorporates the life-cycle pattern. This pattern implies two important features the model must include: the hump-shaped rise and fall in earnings that the average household experiences over time and a realistic life span that captures the different mortality risks among households of different age groups. ; The four papers discussed use variations of the basic model to explore the life-cycle behavior of housing versus nonhousing consumption, the effect of house prices changes on the macroeconomy, the effect on households of the availability of different mortgage contracts, and the effect on households of subsidizing mortgage interest rates.Housing - Econometric models

Fear and perceived likelihood of victimization in the traditional and cyber settings

This study considers the influence of perceived likelihood, demographics (gender and education) and personality on fear of victimization and cyber-victimization using a survey design (N=159). The results suggest that perceived likelihood of victimization predicts fear of victimization in traditional contexts. Women tend to be more fearful of victimization in traditional and cyber contexts, confirming previous research. No group differences emerged in relation to education. Self-esteem and self-efficacy were not significant predictors of fear or perceived likelihood of victimization. However, perceived likelihood was a significant predictor of fear of victimization in traditional settings. This may suggest that different variables (such as awareness of vulnerability) may play a role in fear of victimization in cyber settings. Further group comparisons revealed that fear of victimization and cybervictimization depended on whether or not participants reported high or low perceived likelihood of victimization and internet use. Higher internet use was associated with greater fear of victimization, especially in combination with greater perceived likelihood of victimization. This may suggest an exposure effect, in that being online more frequently may also increase awareness of cyber incidents

Lessons Learnt From WASH Action Research With Practitioners in Four Countries

This is the final report from the Action Research for Learning programme, a three-year initiative (2013 -- 2015), led by IRC, to improve the effectiveness of existing hygiene promotion and community empowerment programmes of selected local Dutch WASH Alliance partners in Bangladesh, Ethiopia, Ghana and Uganda. In Ethiopia and Bangladesh, the focus was on hygiene promotion, while in Ghana and Uganda the focus was on community empowerment interventions

A dynamic model with vertical specialization, credit chains, and incomplete enforcement

This paper sets up a model to account for differences in total factor productivity due to differences in enforcement of contracts. Vertical specialization generates the need for intra-period credit, because final goods producers cannot pay their intermediate goods suppliers before they produce their final good. The paper shows that if there are enforcement problems, the capital distribution is skewed in the sense that intermediate goods producers operate at lower capital levels and higher marginal products of capital than final goods producers. This wedge is created by the price for intermediate goods, which is lower in economies with bad enforcement. For this reason, the high-productivity firms in the intermediate goods sector have no incentive to grow and the low-productivity firms in the final goods sector, benefiting from low intermediate goods prices, have no incentive to shrink, which causes productivity to be lower in countries with bad enforcement.Productivity ; Contracts ; Econometric models

Extreme atmosphere models, 1973

The results of a study that used radiosonde soundings to select the extreme atmospheric conditions in the continental United States are presented

Energy price shocks and the macroeconomy: the role of consumer durables

So far, the literature on dynamic stochastic general equilibrium models with energy price shocks uses energy on the production side only. In these models, energy shocks are responsible for only a negligible share of output fluctuations. We study the robustness of this finding by explicitly modeling private consumption of energy at the household level in addition to energy use at the firm level to account for total energy use in the economy. Additionally, we distinguish between investment in consumer durables and investment in capital goods. The model economy is calibrated to match total energy use and durable goods consumption as observed in the U.S. data. Simulation results indicate that, despite higher total energy use, this economy has an even smaller proportion of output fluctuations attributable to energy price shocks. Productivity shocks continue to be the primary force behind business cycle fluctuations. The driving force behind our results is that the household now has the flexibility to rebalance its investment portfolio. Specifically, the energy price hike is absorbed by reducing durable goods investment more than investment in capital goods, thereby cushioning the hit to future production at the expense of current consumption. Hence, our model better matches the consumption volatility observed in the data.

Health insurance and tax policy

The U.S. tax policy on health insurance favors only those offered a group insurance through their employers. This policy is highly regressive since the subsidy takes the form of deductions from the progressive tax system. The paper investigates alternatives to the current policy. We find that the complete removal of the subsidy results in a significant reduction in the insurance coverage and serious welfare deterioration. However, eliminating regressiveness in the group insurance subsidy and extending benefits to the private insurance market improve welfare and raise the coverage. Our work is the first in highlighting the importance of studying health policy in a general equilibrium framework with an endogenous demand for the health insurance. We use the Medical Expenditure Panel Survey (MEPS) to calibrate the process for income, health expenditure shocks, and health insurance offer status and succeed in producing the pattern of insurance demand as observed in the data, which serve as a solid benchmark for the policy experiments.

What determines the output drop after an energy price increase: household or firm energy share?

During the past thirty-five years, energy use as a fraction of output has dropped significantly at both the household and the firm levels. Therefore, we investigate a dynamic stochastic generalized equilibrium model economy's response to an energy price hike for different firm and household energy shares. Simulation results indicate that the economy's output response is mainly determined by the firm energy share. Increasing the household energy share while keeping firm energy share constant actually decreases the output response.

How resilient is the modern economy to energy price shocks?

While many empirical economists claim that energy price shocks drive U.S. business cycles, economists using dynamic stochastic general equilibrium (DSGE) models believe that business cycles are caused mainly by productivity shocks. ; The authors reconcile the two views by constructing a DSGE model that incorporates energy use into the production function. Calibrating the model properties to match annual U.S. data from 1970 to 2005, they undertake two different experiments. The first incorporates a negative correlation between energy prices shocks and productivity as observed before 1985, and the second, without this correlation, mimics the current period. ; Their simulation confirms the findings of the econometric literature that energy price shocks reduced real output growth prior to 1985. The model simulation without the correlation explains why in 1986, when energy prices fell, there was no major increase in growth rates and, most important, why there was no recession in 2005, when energy prices rose. ; The authors conclude that the modern economy, represented by the period after 1985, is very resilient to energy price increases. Price controls on energy in the 1970s, the authors argue, may have done more harm than good, and they caution that policies inhibiting the functioning of free markets could again make the economy susceptible to energy price–induced recessions.Business cycles ; Econometric models