| 1. |
- Ljungqvist, Lars, et al.
(författare)
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Do Taxes Explain European Employment? : Indivisible Labor, Human Capital, Lotteries, and Savings
- 2006
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Ingår i: NBER Macroeconomics Annual. - : MIT Press. - 1537-2642 .- 0889-3365. - 0262012391 - 9780262012393 ; 21, s. 181-246
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Tidskriftsartikel (refereegranskat)abstract
- Adding generous government supplied benefits to Prescott's (2002) model with employment lotteries and private consumption insurance causes employment to implode and prevents the model from matching outcomes observed in Europe. To understand the role of a "not-so-well-known aggregation theory" that Prescott uses to rationalize the high labor supply elasticity that underlies his finding that higher taxes on labor have depressed Europe relative to the United States, this paper compares aggregate outcomes for economies with two arrangements for coping with indivisible labor: (1) employment lotteries plus complete consumption insurance, and (2) individual consumption smoothing via borrowing and lending at a risk-free interest rate. The two arrangements support equivalent outcomes when human capital is not present; when it is present, allocations differ because households' reliance on personal savings in the incomplete markets model constrains the "career choices" that are implicit in their human capital acquisition plans relative to those that can be supported by lotteries and consumption insurance in the complete markets model. Nevertheless, the responses of aggregate outcomes to changes in tax rates are quantitatively similar across the two market structures. Thus, under both aggregation theories, the high disutility that Prescott assigns to labor is an impediment to explaining European nonemployment and benefits levels. Moreover, while the identities of the nonemployed under Prescott's tax hypothesis differ between the two aggregation theories, they all seem counterfactual.
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| 2. |
- Ljungqvist, Lars
(författare)
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Lucas Critique
- 2008. - 2
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Ingår i: The New Palgrave Dictionary of Economics. - : Palgrave Macmillan. - 9780333786765
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Bokkapitel (övrigt vetenskapligt/konstnärligt)abstract
- The ‘Lucas critique’ is a criticism of econometric policy evaluation procedures that fail to recognize that optimal decision rules of economic agents vary systematically with changes in policy. In particular, it criticizes using estimated statistical relationships from past data to forecast the effects of adopting a new policy, because the estimated regression coefficients are not invariant but will change along with agents’ decision rules in response to a new policy. A classic example of this fallacy was the erroneous inference that a regression of inflation on unemployment (the Phillips curve) represented a structural trade-off for policy to exploit.
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| 3. |
- Ljungqvist, Lars, et al.
(författare)
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Optimal Endowment Destruction under Campbell-Cochrane Habit Formation
- 2009
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Campbell and Cochrane (1999) formulate a model that successfully explains a wide variety of asset pricing puzzles, by augmenting the standard power utility function with a time-varying subsistence level, or "external habit", that adapts nonlinearly to current and past average consumption in the economy. This paper demonstrates, that this comes at the "price" of several unusual implications. For example, we calculate that a society of agents with the preferences and endowment process of Campbell and Cochrane (1999) would experience a welfare gain equivalent to a permanent increase of nearly 16% in consumption, if the government enforced one month of fasting per year, reducing consumption by 10 percent then. We examine and explain these features of the preferences in detail. We numerically characterize the solution to the social planning problem. We conclude that Campbell-Cochrance preferences will provide for interesting macroeconomic modeling challenges, when endogenizing aggregate consumption choices and government policy.
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| 4. |
- Ljungqvist, Lars, et al.
(författare)
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Understanding European unemployment with a representative family model
- 2007
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Ingår i: Journal of Monetary Economics. - : Elsevier B.V. - 1873-1295 .- 0304-3932. ; 54:8, s. 2180-2204
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Tidskriftsartikel (refereegranskat)abstract
- A representative family model with indivisible labor and employment lotteries has no labor market frictions and complete markets. Nevertheless, its aggregate responses to an increase in government supplied unemployment insurance (UI) and to an increase in microeconomic turbulence are qualitatively similar to those in two macromodels with labor market frictions and incomplete markets, namely, the matching and search-island models in Ljungqvist and Sargent [2007a. Understanding European unemployment with matching and search-island models. Journal of Monetary Economics, this issue]. Because there is no frictional unemployment in the representative family model, an increase in employment protection (EP) decreases aggregate work because the representative family substitutes leisure for work, an effect opposite to what occurs in matching and search-island models. Heterogeneity among workers highlights the economy-wide coordination in labor supply and consumption sharing that employment lotteries and complete markets achieve in the representative family model. A high disutility of labor makes generous UI cause very low employment levels.
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| 5. |
- Ljungqvist, Lars, et al.
(författare)
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Understanding European unemployment with matching and search-island models
- 2007
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Ingår i: Journal of Monetary Economics. - : Elsevier B.V. - 1873-1295 .- 0304-3932. ; 54:8, s. 2139-2179
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Tidskriftsartikel (refereegranskat)abstract
- To understand European and American unemployment during the last 60 years, we use a search-island model and four matching models with workers who have heterogeneous skills and entitlements to government benefits. When there is higher turbulence, in the sense of worse skill transition probabilities for workers who suffer involuntary layoffs, high government mandated unemployment insurance (UI) and employment protection (EP) in Europe increase unemployment rates and durations. But when there is lower turbulence, high European EP suppresses unemployment rates despite high European UI. Four matching models differ in how they assign unemployed workers to matching functions. That affects how strongly unemployment responds to increases in turbulence. Heterogeneity among unemployed workers highlights the central role of adverse labor market externalities in matching models and reveals that the cost of posting vacancies is the lynchpin of a matching model.
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| 6. |
- Sargent, Thomas, J., et al.
(författare)
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Lotteries for Consumers versus Lotteries for Firms
- 2005
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Ingår i: Frontiers in Applied General Equilibrium Modeling. - : Cambridge University Press. - 0511614330 - 9780511614330 - 9780521153737 - 9780521825252 - 0521153735 - 0521825253 ; , s. 119-126
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Bokkapitel (refereegranskat)abstract
- Edward C. Prescott emphasizes similarities between lotteries that smooth nonconvexities for firms and for consumers–workers. We emphasize their differences. We also argue that models with employment lotteries that are used to generate unemployed individuals in a frictionless framework can have implications very different from those of models embodying frictional unemployment. As an illustration, models with employment lotteries predict effects from job destruction taxes that are the opposite of those in search models.
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| 7. |
- Sargent, TJ, et al.
(författare)
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Taxes, benefits, and careers: Complete versus incomplete markets
- 2008
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Ingår i: Journal of Monetary Economics. - : Elsevier. - 0304-3932. ; 55:1, s. 98-125
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Tidskriftsartikel (refereegranskat)abstract
- An incomplete-market life-cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non-employment benefits. We compare aggregate and individual outcomes in this individualistic incomplete-market model with those in a comparable collectivist representative-family model with employment lotteries and complete-insurance markets. The incomplete- and complete-market structures assign leisure to different types of individuals who are distinguished by their human capital and age. These microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non-employment benefits, but remarkably, not to labor tax changes.
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| 8. |
- Sargent, TJ, et al.
(författare)
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Two questions about European unemployment
- 2008
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Ingår i: Econometrica. - : Econometric Society: Econometrica. - 1468-0262 .- 0012-9682. ; 76:1, s. 1-29
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Tidskriftsartikel (refereegranskat)
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| 9. |
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