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Author: Davide Maria Melcangi
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Languages : en
Pages : 0
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Author: Davide Maria Melcangi
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Category :
Languages : en
Pages : 0
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Author: Lei Zhang
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Category :
Languages : en
Pages : 192
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This dissertation contains three essays at the interaction between macroeconomics and the financial market, with an emphasis on macroeconomic implications of heterogeneous firms under financial frictions. My dissertation explores the relationships among financial market friction, firms' entry and exit behaviors, and job reallocation over the business cycle. Chapter 1 examines the macroeconomic effects of financial leverage and firms' endogenous entry and exit on job reallocation over the business cycle. Financial leverage and the extensive margin are the keys to explain job reallocation at both the firm-level and the aggregate level. I build a general equilibrium industry dynamics model with endogenous entry and exit, a frictional labor market, and borrowing constraints. The model provides a novel theory that financially constrained firms adjust employment more often. I characterize an analytical solution to the wage bargaining problem between a leveraged firm and workers. Higher financial leverage allows constrained firms to bargain for lower wages, but also induces higher default risks. In the model, firms adopt (S,s) employment decision rules. Because the entry and exit firms are more likely to be borrowing constrained, a negative shock affects the inaction regions of the entry and exit firms more than that of the incumbents. In the simulated model, the extensive margin explains 36% of the job reallocation volatility, which is very close to the data and is quantitatively significant. Chapter 2 investigates firms' financial behaviors and size distributions over the business cycle. We propose a general equilibrium industry dynamics model of firms' capital structure and entry and exit behaviors. The financial market frictions capture both the age dependence and size dependence of firms' size distributions. When we add the aggregate shocks to the model, it can account for the business cycle patterns of firm dynamics: 1) entry is more procyclical than exit; 2) debt is procyclical, and equity issuance is countercyclical; and 3) the cyclicalities of debt and equity issuance are negatively correlated with firm size and age. Chapter 3 studies the equilibrium pricing of complex securities in segmented markets by risk-averse expert investors who are subject to asset-specific risk. Investor expertise varies, and the investment technology of investors with more expertise is subject to less asset-specific risk. Expert demand lowers equilibrium required returns, reducing participation, and leading to endogenously segmented markets. Amongst participants, portfolio decisions and realized returns determine the joint distribution of financial expertise and financial wealth. This distribution, along with participation, then determines market-level risk bearing capacity. We show that more complex assets deliver higher equilibrium returns to expert participants. Moreover, we explain why complex assets can have lower overall participation despite higher market-level alphas and Sharpe ratios. Finally, we show how complexity affects the size distribution of complex asset investors in a way that is consistent with the size distribution of hedge funds.
Author: Juan Pablo Medina Guzman
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Category : Macroeconomics
Languages : en
Pages : 312
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Author: Xiaomei Sui
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Category : Economic development
Languages : en
Pages : 0
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"This dissertation consists of essays studying how macroeconomic outcomes, particularly aggregate productivity growth, are affected by the change in market environment or market frictions in the presence of heterogeneous firms from an international perspective. Each chapter employs both empirical and quantitative macroeconomic methods. The first chapter studies how globalization contributes to uneven firm growth and its implications for industrial concentration and productivity growth in OECD countries. I document new facts showing that industry leaders grow faster in sales and patenting than followers, particularly in industries with increasing export intensities; sales divergence is mainly driven by exports rather than domestic sales. To rationalize these facts, I develop a two-country endogenous growth model with strategic domestic and international competition and an 'innovation disadvantage of backwardness' that captures how firms innovate less when left behind. Globalization, modelled as decreasing trade iceberg costs and increasing international knowledge spillovers, triggers a stronger innovation response among leaders than followers via the market size effect, inducing an increase in domestic concentration that depresses firm innovation via weaker domestic competition: followers and leaders reduce innovation due to the innovation dis-advantage of backwardness and decreasing returns to innovation, respectively. The globalization-induced harsher foreign competition also reduces innovation via lower profits. In the calibrated model, globalization explains 80% of the rise in industrial concentration and 50% of the productivity growth slowdown in the data, mainly due to weaker domestic competition. The increasing international knowledge spillover force of globalization dominates. The second chapter studies how the less-developed financial market in Southern European countries contributes to their slower aggregate productivity growth than developed European countries since the information and communications technology revolution. I document that Southern European firms have lower productivity growth, lower intangible capital growth, and lower leverage than developed European firms. The disparity is larger among smaller firms. To rationalize these findings, I build a model featuring endogenous firm productivity growth through innovation investment and size-dependent financial frictions. Financial frictions lower productivity growth via two channels: innovation investment and misallocation. The model finds that financial frictions account for at least 11% of the aggregate productivity growth difference in the data, mainly via the innovation investment channel. The model also highlights that fast capital and output growth may coexist with slow productivity growth due to firms' tradeoffs in allocating a constrained amount of investment between capital and productivity."--Pages viii-ix.
Author: Liyan Shi
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ISBN:
Category :
Languages : en
Pages : 136
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This dissertation contributes towards the understanding of the macroeconomic effects of micro-level firm dynamics, in particular firm entry, exit, and innovation activities in driving aggregate economic dynamism and growth. It focuses on the frictions affecting firms in these activities when contracting with their managers and workers, as well as peers, and the corrective role policies can play. The dissertation consists of two chapters. The first chapter, "Restrictions on Executive Mobility and Reallocation: The Aggregate Effect of Non-Competition Contracts", assesses the aggregate effect of non-competition employment contracts, agreements that exclude employees from joining competing firms for a duration of time, in the managerial labor market. These contracts encourage firm investment but restrict manager mobility. To explore this tradeoff, I develop a dynamic contracting model in which firms use non-competition to enforce buyout payment when their managers are poached, ultimately extracting rent from outside firms. Such rent extraction encourages initial employing firms to undertake more investment, as they partially capture the external payoff, but distorts manager allocation. I show that the privately-optimal contract over-extracts rent by setting an excessively long non-competition duration. Therefore, restrictions on non-competition can improve efficiency. To quantitatively evaluate the theory, I assemble a new dataset on non-competition contracts for executives in U.S. public firms. Using the contract data, I find that executives under non-competition are associated with a lower separation rate and higher firm investment. I also provide new empirical evidence consistent with non-competition reducing wage-backloading in the model. The calibrated model suggests that the optimal restriction on non-competition duration is close to banning non-competition. The second chapter, "Knowledge Creation and Diffusion with Limited Appropriation" (joint with Hugo Hopenhayn), studies the interaction of innovation and imitation in driving economic growth. In relation to a series of recent papers in the macro literature have emphasized the interaction between the two forces, we introduce two key elements in considering the incentives to innovate versus imitate. First, we consider frictions in matching innovators and imitators in the process of knowledge diffusion. Second, while most of the recent literature assume that imitators capture the entire surplus from knowledge diffusion, we consider a general bargaining problem between the innovators and imitators in dividing surplus. In a simple one period model, we derive a Hosios condition for the optimal surplus division when firms are ex-ante homogeneous. But we also find that as the degree of firm heterogeneity increases, innovators' share of surplus must decrease to maximize growth, approaching zero for sufficiently large heterogeneity. Our calibrated dynamic model suggests that the optimal share of surplus innovators appropriate should be at the lower end, consistent with weak intellectual property rights.
Author: Christine N. Tewfik
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Category :
Languages : en
Pages : 0
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My dissertation is comprised of three papers on the causes and consequences of the U.S. Great Recession. The emphasis is on the role that financial frictions play in magnifying financial shocks, as well as in informing the effectiveness of potential policies. Chapter 1, "Financial Frictions, Investment Delay and Asset Market Interventions," co-authored with Shouyong Shi, studies the role of investment delay in propagating different types of financial shocks, and how this role impacts the effectiveness of asset market interventions. The topic is motivated by the observation that, during the Great Recession, governments conducted large-scale asset market interventions. The aim was to increase the level of liquidity in the asset market and make it easier for firms to obtain financing. However, firms were observed to have delayed investment by hoarding liquid funds, part of which were obtained through the interventions. We construct a dynamic macro model to incorporate financial frictions and investment delay. Investment is undertaken by entrepreneurs who face liquidity frictions in the equity market and a collateral constraint in the debt market. After calibrating the model to the U.S. data, we quantitatively examine how aggregate activity is affected by two types of financial shocks: (i) a shock to equity liquidity, and (ii) a shock to entrepreneurs' borrowing capacity. We then analyze the effectiveness of government interventions in the asset market after such financial shocks. In particular, we compare the effects of government purchases of private equity and of private debt in the open market. In addition, we examine how these effects of government interventions depend on the option to delay investment. In Chapter 2, "Housing Liquidity and Unemployment: The Role of Firm Financial Frictions," I build upon the role that firms' ability to obtain funding plays in the severity of the Great Recession. I focus specifically on how the housing crisis reduced the ability of firms to obtain funding, and the consequences for unemployment. An important feature I focus on is the role of housing liquidity, or how easy it is to sell or buy a house. I analyze how an initial fall in housing market liquidity, linked to rising foreclosure costs for banks, affects labor market outcomes, which can have further feedback effects. I focus on the role that firm financial frictions play in these feedback effects. To this end, I construct a dynamic macro model that incorporates frictional housing and labor markets, as well as firm financial frictions. Mortgages are obtained from banks that incur foreclosure costs in the event of default. Foreclosure costs also affect the ease with which firms can borrow, and this influences their hiring decisions. I calibrate the model to U.S. data, and find that a rise in foreclosure costs that generates a 10% fall in the firm loan-to-output ratio results in a 3 percentage point rise in the unemployment rate. The rise in unemployment makes it more difficult for indebted owners to avoid defaulting on their mortgage. This rise in default, on the order of 20 percent, creates further slack in the housing market by both increasing the number of houses on the market and reducing the amount of buyers. Consequently, there are large drops in housing prices and in the size of mortgage loans. Notably, when firm financial frictions are absent, I observe a counter-factual fall in the unemployment rate, which mitigates the effects on the housing market, and even results in a fall in the mortgage default rate. The results highlight the importance of the impact of the housing market crisis on a firm's willingness to hire, and how firms' limited access to credit magnifies the initial housing shock. In Chapter 3, "Housing Market Distress and Unemployment: A Dynamic Analysis," I add to the contributions of my second paper, and extend the analysis to determine the dynamic effects of the housing crisis on unemployment. In Chapter 2, I focused on comparing stationary equilibria when there is a rise in the foreclosure costs associated with mortgage default. However, a full analysis must also take into account the dynamic effects of the shock. In order to do the dynamic analysis, I modify the model in my job market paper to satisfy the conditions of block recursivity. I do this by incorporating Hedlund's (2016) technique of introducing real estate agents in the housing market that match separately with buyers and sellers. Doing this makes the model's endogenous variables independent of the distribution of households and firms. Rather, the impact of the distribution is summarized by the shadow value of housing. This greatly improves the tractability of the model, and allows me to compute the dynamic response to a fall in a bank's ability to sell a foreclosed house, thus raising the costs of mortgage default. I find that the results are largely dependent on the size and persistence of the shock, as well as the level of firm financial frictions that are present. When firm financial frictions are high, as represented by the presence of an interest rate premium charged to firms, and the initial shock is large, the shock is transferred to firms via an endogenous rise in the cost of renting capital. Firms scale back on production and reduce employment. The rise in unemployment increases the debt burden for households with large mortgages. They can try and sell, but find it difficult to do so because they must sell at a high price to be able to pay off their debt. If they fail, they are forced to default, thus further raising the mortgage costs of banks, further reducing resources to firms, and propagating the initial shock. However, the extent of the propagation is limited; once the shock wears off, the economy recovers to its pre-crisis levels within two quarters. I discuss the reasons why, and what elements would be needed for greater persistence.
Author: Yuanhao Niu
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 85
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Author: Felicien Jesugo Goudou
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Category :
Languages : en
Pages : 0
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This thesis contributes to understanding labor market frictions and how these frictions impact macroeconomic aggregates such as unemployment and productivity. It also critically examines environmental policies such as carbon taxes and green financing. The first chapter examines how non-compete contracts signed between employers and employees affect unemployment, productivity, and welfare in the economy. These contracts stipulate that the employee, while under contract, cannot work for a competing employer for a specified period, typically ranging from one to two years after separation from their initial employer. This type of contract is widespread in the United States and affects at least one in five employees in the country. Results show that a high enforceable incidence of these contracts can compress wages and generate unemployment. This is primarily due to the fact that some individuals who have signed such contracts face difficulties in finding new employment after separating from their initial job. The article proposes reducing the duration of the post-employment restrictions of these contracts to mitigate their effects on workers. However, it is worth noting that these contracts partially benefit employers by incentivizing them to invest in employee training, thereby increasing overall productivity. Speaking of employment contracts, the second chapter evaluates the implications of the coexistence of temporary contracts (fixed-term contracts) and permanent contracts (indefinite-term contracts) on worker flows between unemployment, employment, and labor force non-participation over the life-cycle. This analysis is particularly important due to the effects of these flows on aggregate employment and wages over the life-cycle. It is found that transitions of individuals from permanent employment to unemployment are the most significant factor explaining aggregate employment over the life-cycle. Any policy aimed at increasing employment should target this flow of workers. Moreover, the transition of individuals from temporary employment to unemployment is significant in explaining the low employment of young individuals in European countries like France, especially for those with higher levels of education. The article goes further by constructing a model that explains the observed transition profiles during agents' life-cycle and analyzes how the effects linked to employment protection reforms in European countries are distributed among workers based on their level of education and age. Finally, the third chapter provides a critical assessment of environmental policies such as emissions taxes on production units and green financing. The article shows that despite their effectiveness in reducing emissions, these policies can negatively impact resource allocation, such as capital, among firms, thus reducing aggregate productivity. This is because some highly productive but seriously financially constrained firms may struggle to invest in emission reduction technology, while less productive but wealthy entrepreneurs invest more easily. The burden of emissions-related fiscal measures forces the former to exit the market, thereby reducing productivity. This suggests that other policies, such as green subsidies, are important to mitigate these potential distortions.
Author: Maryam Vaziri
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Category :
Languages : en
Pages : 0
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Author: Thomas Walsh
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Category :
Languages : en
Pages : 0
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