In the postwar era, developed economies have experienced two substantial trends in the net capital share of aggregate income: a rise during the last several decades, which is well known, and a fall ...of comparable magnitude that continued until the 1970s, which is less well known. Overall, the net capital share has increased since 1948, but once disaggregated this increase turns out to come entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. Several influential accounts of the recent rise emphasize the role of increased capital accumulation, but this view is at odds with theory and evidence: it requires empirically improbable elasticities of substitution, and it presumes a correlation between the capital-income ratio and capital share that is not visible in the data. A more limited narrative that stresses scarcity and the increased cost of housing better fits the data.These results are clarified using a new, multisector model of factor shares.
Aggregate Demand and the Top 1 Percent Auclert, Adrien; Rognlie, Matthew
The American economic review,
05/2017, Letnik:
107, Številka:
5
Journal Article
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Odprti dostop
There has been a large rise in US top income inequality since the 1980s. We merge a widely studied model of the Pareto tail of labor incomes with a canonical model of consumption and savings to study ...the consequences of this increase for aggregate demand. Our model suggests that the rise of the top 1 percent may have led to a large increase in desired savings and can explain a 0.45pp to 0.85pp decline in long-run real interest rates. This effect arises from both a wealth effect at the top and increased precautionary savings from declines lower in the income distribution.
A common view of sovereign debt markets is that they are prone to multiple equilibria. We prove that, to the contrary, Markov perfect equilibrium is unique in the widely studied model of Eaton and ...Gersovitz (1981), and we discuss multiple extensions and limitations of this finding. Our results show that no improvement in a borrower׳s reputation for repayment can be self-sustaining, thereby strengthening the Bulow and Rogoff (1989) argument that debt cannot be sustained by reputation alone.
•The Eaton–Gersovitz model is widely used for empirical analyses of sovereign debt markets.•We show that the model with exogenous default value and short-term debt admits a unique equilibrium.•This counters the common view that sovereign debt markets are prone to multiple equilibria.•Multiplicity requires altering the timing of the model, or considering long-term debt.
We propose a general and highly efficient method for solving and estimating general equilibrium heterogeneous-agent models with aggregate shocks in discrete time. Our approach relies on the rapid ...computation of sequence-space Jacobians—the derivatives of perfect-foresight equilibrium mappings between aggregate sequences around the steady state. Our main contribution is a fast algorithm for calculating Jacobians for a large class of heterogeneous-agent problems. We combine this algorithm with a systematic approach to composing and inverting Jacobians to solve for general equilibrium impulse responses. We obtain a rapid procedure for likelihood-based estimation and computation of nonlinear perfect-foresight transitions. We apply our methods to three canonical heterogeneous-agent models: a neoclassical model, a New Keynesian model with one asset, and a New Keynesian model with two assets.
New Pricing Models, Same Old Phillips Curves? Auclert, Adrien; Rigato, Rodolfo; Rognlie, Matthew ...
The Quarterly journal of economics,
02/2024, Letnik:
139, Številka:
1
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Abstract
We show that in a broad class of menu cost models, the first-order dynamics of aggregate inflation in response to arbitrary shocks to aggregate costs are nearly the same as in Calvo models ...with suitably chosen Calvo adjustment frequencies. We first prove that the canonical menu cost model is first-order equivalent to a mixture of two time-dependent models, which reflect the extensive and intensive margins of price adjustment. We then show numerically that in any plausible parameterization, this mixture is well approximated by a single Calvo model. This close numerical fit carries over to other standard specifications of menu cost models. Thus, for shocks that are not too large, the Phillips curve for a menu cost model looks like the New Keynesian Phillips curve, but with a higher slope.
We show that New Keynesian models with frictionless labor supply face a challenge: given standard parameters, they cannot simultaneously match plausible estimates of marginal propensities to consume ...(MPCs), marginal propensities to earn (MPEs), and fiscal multipliers. A HANK model with sticky wages provides a solution to this trilemma.
Investment Hangover and the Great Recession Rognlie, Matthew; Shleifer, Andrei; Simsek, Alp
American economic journal. Macroeconomics,
04/2018, Letnik:
10, Številka:
2
Journal Article
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We present a model of investment hangover motivated by the Great Recession. Overbuilding of durable capital such as housing requires a reallocation of productive resources to other sectors, which is ...facilitated by a reduction in the interest rate. When monetary policy is constrained, overbuilding induces a demand-driven recession with limited reallocation and low output. Investment in other capital initially declines due to low demand, but it later booms and induces an asymmetric recovery in which the overbuilt sector is left behind. Welfare can be improved by ex post policies that stimulate investment (including in overbuilt capital) and ex ante policies that restrict investment.
Will the secular decline in the real interest rate ultimately lead to a rise, or a fall, in the labor share? This, along with many other long-run macro questions, depends on the aggregate ...substitutability of capital for labor in response to interest rates. In a one-sector model, what matters is the elasticity of substitution in the production function; in a multi-sector model, by contrast, I argue that there is a composite elasticity that de- pends on preferences, technology, and the network structure of the economy. I derive this elasticity as a function of micro elasticities and shares, and find that it is essential to account for heterogeneity in depreciation rates across different types of capital: longer-lived capital receives an overwhelmingly higher weight in the aggregate elasticity. Applying the theory, I then show that households’ preferences play a dominant role: their elasticity of substitution between goods that are more and less intensive in longer-lived capital, particularly between housing and all other goods, drives the aggregate result. Empirically, I find that the elasticity of the capital/output ratio with respect to interest rates is most likely less than one, and declining real interest rates will push up the labor share in the long run.
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