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Author:
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Languages : en
Pages : 31
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Author:
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ISBN:
Category :
Languages : en
Pages : 31
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Author: Yongsung Chang
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Category :
Languages : en
Pages : 0
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We study business cycle fluctuations in heterogeneous-agent general equilibrium models that feature both intensive and extensive margins of labor supply. A nonconvexity in the mapping between time devoted to work and labor services combined with idiosyncratic shocks generates operative extensive and intensive margins. We consider calibrated versions of this model that differ in the value of a key preference parameter for labor supply and the extent of heterogeneity. The model is able to capture the salient features of the empirical distribution of hours worked, including how individuals transit within this distribution. We then study how the various specifications influence labor supply responses to aggregate technology shocks. We ask to what extent our predictions for business cycle fluctuations are affected by abstracting from the intensive margin and instead assuming that adjustment occurs only along the extensive margin. We find that abstracting from intensive margin adjustment can have large effects on the volatility of aggregate hours even if fluctuations along the intensive margin are small.
Author: Yongsung Chang
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Languages : en
Pages : 0
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We study business cycle fluctuations in heterogeneous agent general equilibrium models featuring intensive and extensive margins of labor supply. A nonlinear mapping from time devoted to work to labor services generates operative extensive and intensive margins. Our model captures the salient features of the empirical distribution of hours worked, including how individuals transit within this distribution. We study how various specifications influence labor supply responses to aggregate technology shocks and find that abstracting from intensive margin adjustment can have large effects on the volatility of aggregate hours even if fluctuations along the intensive margin are small.
Author: Choonsung Park
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Category : Elasticity (Economics)
Languages : en
Pages : 173
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"The theme of this thesis is to measure the aggregate labor supply elasticity both at the intensive and extensive margins. The first two chapters concern measuring the labor supply elasticity at the extensive margin in a manner robust to model specifications. The third chapter obtains an intensive margin elasticity of labor supply in an environment in which workers' hours are complements in production. The first chapter exploits micro data on the joint distribution of consumption and wages to measure the Frisch labor supply elasticity at the extensive margin. I derive the following reservation property of the working decision: in a class of models in which the wage process is exogenous (EWP models), given consumption, there exists a unique wage level above which individuals work and below which they do not. In particular, this property is robust to arbitrary heterogeneity in borrowing constraints, discount factors, and wage processes--intuitively, consumption summarizes these factors that affect individual labor supply. Those workers with low wages relative to consumption are inferred to be more marginally attached to the labor market. The number of such workers is key to the magnitude of the Frisch elasticity at the extensive margin. Using the joint distribution of consumption and wages observed from the PSID waves 1999-2011, I find that (i) the aggregate Frisch elasticity of labor supply at the extensive margin is 0.4, and that (ii) across various demographic groups, the elasticity ranges from 0.2 to 0.6. These estimates are similar to those of quasi-experimental studies, suggesting that the number of marginal workers implied by the data is relatively small. In the second chapter, I allow the wage process to be endogenous by writing a class of models in which individuals accumulate human capital through learning-by-doing (LBD). I again measure the labor supply elasticity at the extensive margin, but consider how the human capital accumulation affects the measured elasticity compared to the simpler environment in Chapter 1. I show that in this environment the reservation wage can be defined conditional on consumption and assets choices. Intuitively, if a worker with the same wage and assets with another individual consumes more, then this suggests that the worker has a higher shadow value of LBD. Thus, consumption and assets choices jointly reveal the willingness to work, or the reservation wage. Using the data of consumption, wages, and assets from the PSID waves 1999-2011, I find that the aggregate labor supply elasticity at the extensive margin under the human capital models is 0.36, while that under the EWP models is 0.4. The small elasticity gap is because individuals with low consumption are likely to have low assets as well, implying that understanding the relationship between consumption and wages remains key to predicting the employment responses to wage shocks. Second, for narrowly defined demographic groups, the measured elasticities range from 0.2 to 1. As with the EWP models, relatively elastic groups are those who are younger, single, nonwhite, female, or without college degree. Considering the human capital accumulation does not particularly change the demographic characteristics of more marginal workers. The third chapter is based on a paper coauthored with Michele Battisti of Ifo Institute, and Ryan Michaels of the Department of Economics at the University of Rochester. We study the labor supply elasticity at the intensive margin in an environment in which workers are complements in production. The complementarity of workers implies an incentive to coordinate labor supply within the firm, which compresses working-time adjustments across workers in response to purely idiosyncratic variation in their return from working. This places no restrictions, however, on the response of firm-wide working time to firm-wide shocks. We estimate a model in which heterogeneous firms and workers bargain on working time and earnings using the method of simulated moments. The target moments are from matched firm-worker data from North-East Italy. We revisit earlier findings of a small intertemporal elasticity of labor supply exploiting the model's prediction that this elasticity will be larger for firm-wide fluctuations than evaluated at the individual level. First, the model uncovers the Frisch labor supply elasticity at the intensive margin 0.53. This value is near the top end of the range of estimates found in earlier studies. Second, to study how ignoring the coordination of labor supply affects the implied elasticity, we simulate the model such that only 1/9 of a firm's workforce receives a lump-sum transfer, but the remainder of the firm's workers do not (The fraction of the workforce corresponds to one cohort of workers that shares the same productivity and preference in the model). If we use the treatment effect in this case to infer the Frisch elasticity, the implied elasticity is less than half the estimate 0.53 we uncover."--Pages v-vii.
Author: Yongsung Chang
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Category :
Languages : en
Pages : 0
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At the aggregate level, the labor-supply elasticity depends on the reservation-wage distribution. We present a model economy where workforce heterogeneity stems from idiosyncratic productivity shocks. The model economy exhibits the cross-sectional earnings and wealth distributions that are comparable to those in the micro data. We find that the aggregate labor-supply elasticity of such an economy is around 1, greater than a typical micro estimate.
Author: José Mustre-del-Río
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Category : Business cycles
Languages : en
Pages : 214
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"Economists often analyze economies populated by identical agents due to their tractability. However, this practice leads to discrepancies between individual and aggregate level observations. Most prominently, these models overlook large differences in behavior and outcomes across workers. This dissertation fills this gap by examining the implications of individual employment and turnover patterns for the aggregate labor market. The first chapter of this dissertation analyzes turnover differences across workers over the business cycle and their implications for overall job duration. Evidence from the National Longitudinal Survey of The Youth (NLSY) 1979-2006 suggests that average (overall) job duration is pro-cyclical, once controlling for worker composition. At the exit margin, jobs ending in recessions are of systematically shorter duration than jobs ending in booms. This result however is driven by high turnover workers who disproportionately account for exits in a recession. At the entry margin, jobs starting in recessions are expected to be of shorter duration. This result is not compositional. Recessions tend to increase the likelihood of any new job ending even when accounting for worker heterogeneity. The second chapter of this dissertation explores the implications of individual labor supply heterogeneity for the aggregate labor supply elasticity. It presents a heterogeneous agent economy with indivisible labor where agents differ in their disutility of labor and market skills. The model is estimated via indirect inference using observations on average employment and wage rates across individuals in the NLSY. The elasticity of aggregate employment in the model is 0.71, which is low compared to the literature. The results suggest that the previous literature generates large aggregate labor supply elasticities by ignoring individual labor supply differences. The third chapter is a natural extension of the second. It addresses what are the resulting aggregate employment fluctuations in an economy where agents differ in their labor supply. The results of this chapter suggest that allowing for individual labor supply heterogeneity has profound cyclical effects. The model predicts that aggregate employment fluctuations are small because individuals with very inelastic labor supply contribute disproportionately to overall employment over the business cycle"--Leaves v-vi.
Author: Richard Rogerson
Publisher:
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Category : Economics
Languages : en
Pages : 52
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I analyze two extensions to the standard model of life cycle labor supply that feature operative choices along both the intensive and extensive margin. The first assumes that individuals face different continuous wage-hours schedules. The second assumes that all work must be coordinated across individuals. These models look similar qualitatively but have very different implications for how aggregate labor supply responds to changes in taxes. In the first model, curvature in the utility from leisure function plays relatively little role in determining the overall change in hours worked, whereas in the second model it is of first order importance. The second model has important implications for what data is best able to provide evidence on the extent of curvature in the utility from leisure function.
Author: Yongsung Chang
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Category :
Languages : en
Pages :
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Standard heterogeneous agent macro models that highlight idiosyncratic productivity shocks do not generate the near zero cross-sectional correlation between hours and wages found in the data. We ask whether matching this moment matters for business cycle properties of these models. To do this we explore two extensions of the model in Chang et al. (2019) that can match this empirical cross-section correlation. One of these departs from the assumption of balanced growth preferences. The other introduces an idiosyncratic shock to the opportunity cost of market work that is highly correlated with the shock to market productivity. While both extensions can match the empirical correlation, they have large and opposing effects on the cyclical volatility of the labor market. We conclude that the cross-sectional moment is important for business cycle analysis and that more work is needed to distinguish the potential mechanisms that can generate it.
Author: Casey B. Mulligan
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 44
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I suggest that the aggregate implications of indivisible labor are few, and subtle. First, I model behavior in an 'indivisible labor' environment like those of Diamond and Mirrlees (1978, 1986), Hansen (1985), Rogerson (1988), Christiano and Eichenbaum (1992) and show that aggregate behavior in such an economy is indistinguishable from aggregates generated by the divisible labor model of Lucas and Rapping (1969); any data on aggregate hours and earnings generated by the divisible (indivisible) model can be generated by a similar parameterization of the indivisible (divisible) model. Second, I generalize the aforementioned models of indivisible labor to allow for labor supply on the 'intensive' margin, and to allow for nonlinear taxes. The aggregate implications of doing the former are quite subtle, but doing the latter suggests that the indivisibility of labor may have implications for public finance. My results also imply that backward bending aggregate labor supply, and any nonnegative degree of aggregate intertemporal substitution, are consistent with standard economic theory even when all labor is supplied on the so-called 'extensive' margin. Finally, my results suggest that the classic aggregate studies of labor supply by Mincer, Bowen and Finegan, and others have a simple microeconomic interpretation
Author: Robert Shimer
Publisher: Princeton University Press
ISBN: 1400835232
Category : Business & Economics
Languages : en
Pages : 189
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Book Description
Labor Markets and Business Cycles integrates search and matching theory with the neoclassical growth model to better understand labor market outcomes. Robert Shimer shows analytically and quantitatively that rigid wages are important for explaining the volatile behavior of the unemployment rate in business cycles. The book focuses on the labor wedge that arises when the marginal rate of substitution between consumption and leisure does not equal the marginal product of labor. According to competitive models of the labor market, the labor wedge should be constant and equal to the labor income tax rate. But in U.S. data, the wedge is strongly countercyclical, making it seem as if recessions are periods when workers are dissuaded from working and firms are dissuaded from hiring because of an increase in the labor income tax rate. When job searches are time consuming and wages are flexible, search frictions--the cost of a job search--act like labor adjustment costs, further exacerbating inconsistencies between the competitive model and data. The book shows that wage rigidities can reconcile the search model with the data, providing a quantitatively more accurate depiction of labor markets, consumption, and investment dynamics. Developing detailed search and matching models, Labor Markets and Business Cycles will be the main reference for those interested in the intersection of labor market dynamics and business cycle research.
