This paper investigates the interrelationship between urbanization, structural transformation, and post-2000 Chinese housing boom through lens of a dynamic spatial equilibrium model that features migration rich market structure with mortgages. Urbanization transformation emerge as key drivers China's house price boom, while at same time rising prices impede these forces economic transition. Pol...

Increases in the minimum wage can substantially reduce earnings inequality. To demonstrate this, we combine administrative and survey data with an equilibrium model of Brazilian labor market. We find that a 128 percent increase real Brazil between 1996 2018 had far-reaching spillover effects on wages higher up distribution. The increased accounts for 45 large fall inequality over this period. A...

We study the importance of input-output (IO) linkages and sectoral productivity (TFP) in determining cross-country income differences. find that while highly connected sectors are more productive than typical sector poor countries, opposite is true rich ones. To assess quantitative role TFP differences differences, we decompose variation using a multisector general equilibrium model. IO substan...

Motivated by the effects of COVID-19 pandemic, we present a theory Keynesian supply shocks: shocks that reduce potential output in sector economy, but that, reducing demand other sectors, ultimately push aggregate activity below potential. A shock is more likely when elasticity substitution between sectors relatively low, intertemporal high, and markets are incomplete. Fiscal policy can display...

This paper combines a data-rich environment with machine learning algorithm to provide new estimates of time-varying systematic expectational errors (“belief distortions”) embedded in survey responses. We find sizable distortions even for professional forecasters, all respondent-types overweighting the implicit judgmental component their forecasts relative what can be learned from publicly avai...

Together with a sense of entering a New Economy, the US experienced in the second half of the 1990s an economic expansion, a stock market boom, a financing boom for new firms and productivity gains. In this paper, we propose an interpretation of these events within a general equilibrium model with financial frictions and decreasing returns to scale in production. We show that the mere prospect ...

We analyze the following questions under imperfect labour markets. How does strategic outsourcing influence wage formation, profit sharing and employee effort when firms commit to optimal profit sharing before wage formation or decide for profit sharing after wage formation? What is the relationship between outsourcing, profit sharing, and equilibrium unemployment? We find that in both scenario...

In this paper, we seek to re-establish the link between the CES production function and neoclassical growth theory. We did so in three dimensions. First, we reviewed the increasing importance of the CES technology in modern dynamic macroeconomics, in expanding not only theory but also in addressing important policy questions. Second, we argued that the importance of the CES function in growth t...

In skill-biased (de-skilling) technological revolutions learning investments required by new machines are greater (smaller) than those required by preexisting machines. Skill-biased (de-skilling) revolutions trigger reallocations of capital from slow(fast-) to fast(slow-) learning workers, thereby reducing the relative and absolute wages of the former. The model of skill-biased (de-skilling) re...

We investigate the hypothesis that macroeconomic fluctuations are primitively the results of many microeconomic shocks. We define fundamental volatility as the volatility that would arise from an economy made entirely of idiosyncratic sectoral or firm-level shocks. Fundamental volatility accounts for the swings in macroeconomic volatility in the major world economies in the past half-century. I...