Macroeconomics

In the classic certainty multiperiod, multigood demand problem, suppose preferences for current and past period consumption are separable from consumption in future periods. Then optimal demands can be determined from the standard two stage budgeting process, where optimal current period demands depend only on current and past prices and current period expenditure. Unfortunately this simplification does not significantly reduce the informational requirements for the decision maker since in general the expenditure is a function of future prices.

The Internet promises a very different technological and regulatory future for film and television. As older media are produced for and delivered through the Internet, how might the content be reshaped? The development of cable and satellite networks promised to bring more channels of more diverse programming to households around the world. Internet access to film and television content is similarly enabling more on-demand access to content from anywhere at any time. Will ever-faster broadband networks change what we will view?

This study uses micro data and an overlapping generations (OLG) model to show that general equilibrium (GE) forces are critical for understanding the relationship between aggregate fertility and household savings. First, we document that parents perceive children as an important source of old-age support and that, in partial equilibrium (PE), increased fertility lowers household savings. Then, we construct an OLG model that parametrically matches the PE empirical evidence.

The regulation of bank capital as a means of smoothing the credit cycle is a central element of forthcoming macro-prudential regimes internationally. For such regulation to be effective in controlling the aggregate supply of credit it must be the case that: (i) changes in capital requirements affect loan supply by regulated banks, and (ii) unregulated substitute sources of credit are unable to offset changes in credit supply by affected banks. This paper examines micro evidence—lacking to date—on both questions, using a unique data set.

We study the equilibrium properties of an overlapping-generation economy where agents choose where to locate and how much housing to own, and city residents vote on the number of new building permits every period. Undersupply of housing persists in equilibrium under conditions we characterize. City residents invest in housing because they expect their investment to be protected by a majority opposed to urban growth. They vote against growth because they have invested in local housing.

The seminal work by Grossmann and Hart (1986) made the study of firm boundaries susceptible to formal economic analysis, and illuminated an important role for markets in providing incentives. In this essay, I discuss some new directions that the literature has taken since. As a central challenge, I identify the need to provide a formal theory of the firm in which managerial direction and bureaucratic decision-making play a key role. Merging a number of existing incomplete contracting models, I propose two approaches with very different contracting assumptions.

Following the classic work of Mitjuschin, Polterovich and Milleron, necessary and sufficient as well as sufficient conditions have been developed for when the multicommodity Law of Demand holds. However, far less attention has been focused on the nature and properties of violations. To address these questions, the existing sufficient conditions although simpler in form are of little value unless they are also necessary. We show when the widely cited Mitjuschin and Poterovich sufficient condition also becomes necessary.

This paper proposes an accounting framework that breaks up a country's gross exports into various value-added components by source and additional double-counted terms. Our parsimonious framework bridges a gap between official trade statistics (in gross value terms) and national accounts (in value-added terms), and integrates all previous measures of vertical specialization and value-added trade in the literature into a unified framework.

Are teachers' impacts on students; test scores ("value-added") a good measure of their quality? This question has sparked debate partly because of a lack of evidence on whether high value-added (VA) teachers who raise students' test scores improve students' long-term outcomes. Using school district and tax records for more than one million children, we find that students assigned to high-VA teachers in primary school are more likely to attend college, earn higher salaries, live in higher SES neighborhoods, and have higher savings rates.