A Note on Relative Prices and Income Distribution over the US Business Cycle: 1857–2009

2020 ◽  
pp. 048661342096286
Author(s):  
Claudio Alberto Castelo Branco Puty
Keyword(s):  
Income Distribution ◽  
Business Cycles ◽  
Labor Costs ◽  
Market Prices ◽  
Relative Prices ◽  
Industrial Economy ◽  
Us Economy ◽  
The Us ◽  
Unit Labor Costs ◽  
Jel Classifications

This paper investigates the relation between relative prices and the income distribution by examining variations in output and prices occurred over thirty-three US business cycles from 1857 to 2009. Using a broad database, the author shows that average relative prices in twenty-seven industries of the US economy presented a remarkably smaller variation than the corresponding variation in output levels, profits and wages. These time-series results, although not conclusive, may provide additional empirical evidence of the Ricardian claim that even relative market prices in an industrial economy are strongly dominated by the correspondent integrated unit labor costs and that changes along a wage-profit schedule will play only a secondary role in their determination. JEL classifications: E11, E32

Optimal Taxation of Families: Mirrlees meets Becker*

2021 ◽  
Author(s):  
Musab Kurnaz
Keyword(s):  
Quantitative Analysis ◽  
Income Distribution ◽  
Income Tax ◽  
Optimal Taxation ◽  
Tax Credits ◽  
Child Rearing ◽  
Welfare Gains ◽  
Us Economy ◽  
Parental Time ◽  
The Us

Abstract This paper studies optimal taxation of families—a combination of an income tax schedule and child tax credits. Child-rearing requires both goods and parental time, which distinctly impact the design of optimal child tax credits. In the quantitative analysis, I calibrate my model to the US economy and show that the optimal child tax credits are U-shaped in income and are decreasing in family size. In particular, the optimal credits decrease in the first nine deciles of the income distribution and then increase thereafter. Implementing the optimum yields large welfare gains.

scholarly journals Kuznets meets Lucas: structural change and human capital

2018 ◽  
Vol 71 (4) ◽  
pp. 848-873
Author(s):  
Edgar Cruz
Keyword(s):  
Human Capital ◽  
Structural Change ◽  
Capital Accumulation ◽  
Human Capital Accumulation ◽  
Relative Prices ◽  
Services Sector ◽  
Us Economy ◽  
The Us ◽  
Balanced Growth Path ◽  
Cross Country

Abstract This paper develops a multi-sector growth model with human capital accumulation. In this model, human capital induces structural change through two channels: changes in relative prices and changes in the investment rate of physical and human capital. We show that the specifications of the model give rise to a generalized balanced growth path (GBGP). Furthermore, We show that the model is consistent with (i) the decline in agriculture, (ii) the hump-shaped of manufacturing, (iii) the rise of the services sector, and (iv) the path of human capital accumulation in the US economy during the 20th century. Given the findings, We outline that imbalances between physical and human capital contribute to explain cross-country differences in the pace of structural change.

scholarly journals SECTORAL LABOR MOBILITY AND OPTIMAL MONETARY POLICY

2021 ◽  
pp. 1-34
Author(s):  
Alessandro Cantelmo ◽  
Giovanni Melina
Keyword(s):  
Labor Mobility ◽  
Central Banks ◽  
New Keynesian ◽  
Optimal Monetary Policy ◽  
Relative Prices ◽  
Optimal Weights ◽  
Us Economy ◽  
Keynesian Model ◽  
Inflation Rates ◽  
The Us

How should central banks optimally aggregate sectoral inflation rates in the presence of imperfect labor mobility across sectors? We study this issue in a two-sector New-Keynesian model and show that a lower degree of sectoral labor mobility, ceteris paribus, increases the optimal weight on inflation in a sector that would otherwise receive a lower weight. We analytically and numerically find that, with limited labor mobility, adjustment to asymmetric shocks cannot fully occur through the reallocation of labor, thus putting more pressure on wages, causing inefficient movements in relative prices, and creating scope for central bank’ s intervention. These findings challenge standard central banks’ practice of computing sectoral inflation weights based solely on sector size and unveil a significant role for the degree of sectoral labor mobility to play in the optimal computation. In an extended estimated model of the US economy, featuring customary frictions and shocks, the estimated inflation weights imply a decrease in welfare up to 10% relative to the case of optimal weights.

scholarly journals Product Creation and Destruction: Evidence and Price Implications

2010 ◽  
Vol 100 (3) ◽  
pp. 691-723 ◽  
Author(s):  
Christian Broda ◽  
David E Weinstein
Keyword(s):  
Business Cycles ◽  
Labor Markets ◽  
Price Index ◽  
Entry And Exit ◽  
Us Economy ◽  
Percentage Points ◽  
The Us ◽  
Large Sector ◽  
Product Creation ◽  
Cost Of Living Index

This paper describes the extent of product creation and destruction in a large sector of the US economy. We find four times more entry and exit in product markets than is found in labor markets because most product turnover happens within firms. Net product creation is strongly procyclical and primarily driven by creation rather than destruction. We find that a cost-of-living index that takes product turnover into account is 0.8 percentage points per year lower than a “fixed goods” price index like the CPI. The procyclicality of the bias implies that business cycles are more volatile than indicated by official statistics. (JEL E31, E32, L11, O31)

scholarly journals Mexico and China in the US manufacturing market: An empirical analysis

2019 ◽  
Vol 65 (4) ◽  
pp. 192
Author(s):  
Víctor M. Cuevas Ahumada ◽  
Cuauhtémoc Calderón Villarreal
Keyword(s):  
Positive Impact ◽  
Export Performance ◽  
Labor Costs ◽  
Clear Cut ◽  
Market Shares ◽  
Plausible Model ◽  
The Us ◽  
Unit Labor Costs ◽  
Key Variables ◽  
The Impact

<p>This paper conducts a disaggregated comparative analysis of China’s and Mexico’s export dynamism in the US manufacturing market over the period 1994-2015 and, against this backdrop, it estimates a panel data econometric model showing the impact of key variables on Mexico’s export performance across manufacturing subsectors of different technology categories. Export performance is measured in terms of import market shares in the US and numerous econometric issues are addressed to produce a plausible model. In addition to capturing some heterogeneity among different manufacturing subsectors, this study shows that: (i) a depreciation of the real exchange rate calculated for each subsector worsens (rather than improves) Mexico’s export performance, which is likely due not only to the high import content of Mexican manufacturing exports, but also to the increasing weight of the private sector’s external liabilities; (ii) a fall in domestic unit labor costs has a positive impact on Mexico’s export performance, which highlights the importance of raising labor productivity faster than wages; and (iii) a reduction in US unit labor costs deteriorates Mexico’s export performance. In this context, the empirical evidence leads to clear-cut policy recommendations to raise export performance and thus economic growth.</p>

The US Bureau of Labor Statistics Productivity Program

2018 ◽  
pp. 120-152 ◽  
Author(s):  
Lucy P. Eldridge ◽  
Chris Sparks ◽  
Jay Stewart
Keyword(s):  
Data Sources ◽  
Labor Costs ◽  
Intermediate Inputs ◽  
Labor Compensation ◽  
Combining Data ◽  
The Us ◽  
Labor Statistics ◽  
Unit Labor Costs ◽  
Capital Services ◽  
Bureau Of Labor Statistics

This chapter describes the US Bureau of Labor Statistics (BLS) productivity program. It presents the BLS’s methodology and data sources used to produce estimates of aggregate and industry-level labor and multifactor productivity growth, along with a number of other productivity-related measures including unit labor costs, labor compensation, and labor share. The chapter provides a detailed description of the main elements of BLS’s productivity measures including: output concepts; how BLS calculates hours worked by combining data from three different surveys; how it accounts for changes in the composition of the labor force; its methodology for estimating capital services; and data sources for intermediate inputs. The chapter also discusses some of the measurement challenges faced by the BLS, and concludes with a discussion of projects currently under way to expand and improve its productivity statistics.

Is risk shock a key factor driving business cycles in China?

2017 ◽  
Vol 19 (1) ◽  
Author(s):  
Zhe Li ◽  
Shuixing Luo
Keyword(s):  
Business Cycles ◽  
Chinese Economy ◽  
New Keynesian ◽  
Macroeconomic Policies ◽  
Us Economy ◽  
Keynesian Model ◽  
The Us ◽  
Key Factor ◽  
Investment Capital ◽  
The Impact

Abstract This paper studies the impact of risk shock on the Chinese economy using a New-Keynesian model with financial frictions. The study shows that risk shock is an important driving force for the fluctuations of GDP, investment, capital, credit, and credit spread in China. However, the role of risk shock in driving China’s business cycles is not as crucial as in the US economy (see Christiano, Motto, and Rostagno 2014). There are three main reasons that explain the different performance of risk shocks in China and the US: the volatility of risk shock, the effect of equity shock, and the influence of macroeconomic policies are all different in China and in the US. Our paper contributes to an understanding of the business cycles in China during the period from 1999 to 2015, particularly in comparison with business cycles in the US.

scholarly journals The Decline of the U.S. Labor Share Across Sectors

2019 ◽  
pp. 1-37 ◽  
Author(s):  
Ivan Mendieta-Muñoz ◽  
Codrina Rada ◽  
Rudi von Arnim
Keyword(s):  
Labor Productivity ◽  
Real Wage ◽  
Structural Changes ◽  
Manufacturing Sector ◽  
Dominant Role ◽  
Early Period ◽  
Relative Prices ◽  
Labor Share ◽  
Us Economy ◽  
The Us

This paper provides novel insights on the changing functional distribution of income in the post– war US economy. We present a Divisia index decomposition of the US labor share (1948–2017) by fourteen sectors. The decomposition method furnishes exact contributions from four components towards aggregate changes of the labor share: sectoral real compensation, sectoral labor productivity, the structure of the economy as measured by employment shares, and the structure of markets as measured by relative prices. Results are presented for the entire period as well as the “golden age” (1948–1979) and a “neoliberal era” (1979–2017), painting a rich and detailed picture of structural changes in the US economy. The manufacturing sector plays a dominant role: despite its continuously falling employment share, growth of real compensation matches that of labor productivity in the early period but falls far behind during the neoliberal era. Further, employment shifts towards stagnant sectors with relatively low real wages and productivity. We discuss these results in the context of Baumol’s and Lewis’s seminal contributions on dual economies. While the cost disease is apparent—employment shifts towards stagnant sectors, their relative prices rise, and the aggregate growth rate (of productivity) decreases—the originally suggested mechanism of upward real wage convergence is muted. The observed changes are instead compatible with a “reverse-Lewis” shift, where stagnant sectors act as a labor surplus sink, and dynamic sector labor experiences slowing real wage growth.

Regimes of Realization: Using Marx and Kalecki to Understand the US Economy, including the Great Recession and the “Recovery”

2018 ◽  
Vol 50 (4) ◽  
pp. 757-772
Author(s):  
David M. Brennan
Keyword(s):  
United States ◽  
Great Recession ◽  
The United States ◽  
Profit Rate ◽  
The Great Recession ◽  
Us Economy ◽  
The Us ◽  
The Future ◽  
Jel Classifications

By integrating selected Kaleckian and Marxian insights, this paper analyzes the sources of profit realization and the profit rate in the US economy from 1964–2013. The most significant sources of profit realization in the United States are capitalists’ consumption and workers’ debt, which historically have been under appreciated both theoretically and empirically. The insights gleaned by analyzing the sources of profit realization aid in understanding the Great Recession and the future of the US economy. JEL Classifications: B51, E11

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