A Human Capital Explanation of Real Business Cycles
with
Szilard Benk, Tamas Csabafi,
Jing Dang, and Max Gillman published in Journal of Human Capital
The
article offers an alternative explanation of business cycles by incorporating
human capital investment as a second sector integrated with accounting methods.
Inputs such as education expenditure and tertiary student time in this sector
enable the explanation of a broad set of business cycle moments. Unlike
one-sector models, which struggle with this challenge, the labor time share,
labor productivity, and consumption are jointly well-explained. Since the goods
sector is less human capital-intensive, human capital deepening occurs during
contractions, whereas expansions are characterized by physical capital
deepening in the goods sector. The external margin of human capital investment
helps clarify conflicting estimates of labor elasticity. Finally, the policy
implications of addressing these RBC puzzles are discussed.
https://www.suerf.org/wp-content/uploads/2024/03/SUERF-Policy-Brief-815_Benk-et-al.pdf
https://www.journals.uchicago.edu/doi/abs/10.1086/728088?journalCode=jhc
with
Radim Bohacek published in Journal
of Economic Theory
In this paper we develop a new approach for finding optimal
government policies in economies with heterogeneous agents. Using the calculus
of variations, we present three classes of equilibrium conditions from
government's and individual agent's optimization problems: 1) the first order
conditions: the government's Lagrange–Euler equation and the individual agent's
Euler equation; 2) the stationarity condition on the distribution function;
and, 3) the aggregate market clearing conditions. These conditions form a
system of functional equations which we solve numerically. The solution takes
into account simultaneously the effect of the government policy on individual
allocations, the resulting optimal distribution of agents in the steady state
and, therefore, equilibrium prices. We illustrate the methodology on a Ramsey
problem with heterogeneous agents, finding the optimal limiting tax on total income.
https://www.sciencedirect.com/science/article/pii/S0022053118301844
with
Max Gillman and Michal Pakoš published in Review
of Finance
Rietz (1988) and Barro
(2006) subject consumption and dividends to rare disasters in the growth rate. We extend their framework and subject consumption and
dividends to rare disasters in the growth persistence. We model growth
persistence by means of two hidden types of economic slowdowns: recessions and
lost decades. We estimate the model based on the postwar US data using maximum
likelihood and find that it can simultaneously match a wide array of dynamic
pricing phenomena in the equity and bond markets. The key intuition for our
results stems from the inability to discriminate between the short and the long
recessions ex ante.
https://academic.oup.com/rof/article/19/3/1053/1594867