Essays on Business Cycles and Micro-Level Regularities
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2012
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ndltd-OhioLink-oai-etd.ohiolink.edu-osu13378738162021-08-03T06:05:17Z Essays on Business Cycles and Micro-Level Regularities Takahashi, Shuhei Economics <p>Data show interesting cyclical patterns in risk and behaviors at the household and firm level. This dissertation explores the implications of such micro-level regularities for business cycle fluctuations using dynamic stochastic general equilibrium models. It consists of the following three essays.</p><p>In the first essay, "Time-Varying Wage Risk, Incomplete Markets, and Business Cycles," I show that the cyclical variation in idiosyncratic wage risk is the key to solving the productivity puzzle of competitive market models. The puzzle is the counterfactual strong comovement of total hours worked and labor productivity (output per labor hour) when aggregate productivity shocks drive those models. I model individuals who make a discrete labor supply choice every period. Those individuals face time-varying wage risk as person-specific labor productivity shocks change in volatility over time. In the absence of full insurance, risk fluctuations affect labor supply choices. Specifically, a rise in wage risk initially increases the fraction of low-productivity individuals that work. Later, this fraction decreases, whereas more individuals with high productivity elect to work. In equilibrium, these shifts in labor supply first increase and then reduce employment. Labor productivity initially falls and later rises. I identify time variation in idiosyncratic wage risk using the cross-sectional dispersion of wage innovations in the Panel Study of Income Dynamics. My estimate is that the standard deviation of fluctuations in idiosyncratic risk is 4.4 percent annually. When introduced alongside shocks to total factor productivity, the varying-risk model reproduces the negative correlation between hours worked and labor productivity found in the U.S. data (-0.38 in the model compared to -0.32 in the data). Since shocks to total factor productivity primarily shift labor demand, in the absence of time-varying risk, the model generates a strong, positive correlation of 0.83.</p><p>Chang and Kim (2007) argue that, without time variation in idiosyncratic wage risk, the above heterogeneous-agent model generates a low correlation between hours and labor productivity.In the second essay, "Hours and Labor Productivity in a Heterogeneous-Agent Model: Comment on Chang and Kim (2007)," I analyze the model using an alternative, more accurate solution method, and find that the productivity puzzle remains in their model. </p><p>The third essay, "State-Dependency in Price and Wage Setting," compares state-dependency in price and wage setting. I find that both state-dependent price and wage setting reduce money nonneutralities when compared to time-dependent setting. However, the effect of state-dependent setting is fundamentally larger for wage than price adjustments. State-dependency in wage setting raises both number and size of wage increases compared to time-dependent setting. By contrast, state-dependency in price setting raises the number of price increases, but reduces the size of each price increase. I also find that the effect of state-dependent pricing is larger when wage setting is state- than time-dependent.</p> 2012-06-22 English text The Ohio State University / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=osu1337873816 http://rave.ohiolink.edu/etdc/view?acc_num=osu1337873816 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws. |
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NDLTD |
| language |
English |
| sources |
NDLTD |
| topic |
Economics |
| spellingShingle |
Economics Takahashi, Shuhei Essays on Business Cycles and Micro-Level Regularities |
| author |
Takahashi, Shuhei |
| author_facet |
Takahashi, Shuhei |
| author_sort |
Takahashi, Shuhei |
| title |
Essays on Business Cycles and Micro-Level Regularities |
| title_short |
Essays on Business Cycles and Micro-Level Regularities |
| title_full |
Essays on Business Cycles and Micro-Level Regularities |
| title_fullStr |
Essays on Business Cycles and Micro-Level Regularities |
| title_full_unstemmed |
Essays on Business Cycles and Micro-Level Regularities |
| title_sort |
essays on business cycles and micro-level regularities |
| publisher |
The Ohio State University / OhioLINK |
| publishDate |
2012 |
| url |
http://rave.ohiolink.edu/etdc/view?acc_num=osu1337873816 |
| work_keys_str_mv |
AT takahashishuhei essaysonbusinesscyclesandmicrolevelregularities |
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1719430636408668160 |