Aggregate Demand, Idle Time, and Unemployment

Michaillat, Pascal; Saez, Emmanuel

doi:10.2139/ssrn.2471035

Cited by 10 publications

(13 citation statements)

References 64 publications

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“…In addition to retail, much manufacturing in this setting is on demand; for example, a mill owner waits for customers to bring grain and then grinds it for them. The existence of slack may help account for the large multiplier we document, as has also recently been argued in US data, especially in poorer US regions (Michaillat and Saez 2015;Murphy 2017).…”

supporting

confidence: 64%

General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

Egger¹,

Haushofer²,

Miguel³

et al. 2019

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supporting

confidence: 64%

General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

Egger¹,

Haushofer²,

Miguel³

et al. 2019

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“…For the H(•) function, we assume a Cobb-Douglas form, ψ n F j α n I j 1−α , where α = 0.5 imposes symmetry. By setting ψ = 0.54, we get that 88% of product lines for the medium firms are active in the steady state, matching the observed 12% average rate of idleness in the U.S. non-manufacturing and manufacturing sectors before the Great Recession (Michaillat andSaez, 2015, andGhassibe andZanetti, 2020).…”

Section: Calibration and Measurementsupporting

confidence: 62%

The “Matthew Effect” and Market Concentration: Search Complementarities and Monopsony Power

Fernández-Villaverde¹,

Mandelman²,

Yu³

et al. 2021

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This paper develops a dynamic general equilibrium model with heterogeneous firms that face search complementarities in the formation of vendor contracts. Search complementarities amplify small differences in productivity among firms. Market concentration fosters monopsony power in the labor market, magnifying profits and further enhancing highproductivity firms' output share. Firms want to get bigger and hire more workers, in stark contrast with the classic monopsony model, where a firm aims to reduce the amount of labor it hires. The combination of search complementarities and monopsony power induces a strong "Matthew effect" that endogenously generates superstar firms out of uniform idiosyncratic productivity distributions. Reductions in search costs increase market concentration, lower the labor income share, and increase wage inequality.

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“…We begin our analysis with a static model that features a goods market with search-and-matching frictions in spirit of Michaillat and Saez (2015). 4 We assume a competitive labor market.…”

Section: A Model With Search-and-matching Frictions In the Goods Marketmentioning

confidence: 99%

“…Firms hire labor in order to manufacture an endogenous productive capacity (k), and consumers and the government make a total of v visits in order to purchase goods. Due to search-and-matching frictions, part of productive capacity remains idle and not all visits are successful, as encapsulated by the matching function that maps productive capacity (k) and visits (v) into sales (y): Notes: panel (a) shows a time series of the share of current capacity utilized by US rms, as calculated by the Institute for Supply Management (ISM) with NBER recessions denoted by grey shaded areas, as reported by Michaillat and Saez (2015); panel (b) shows the share of successful visits to retail stores on di erent days of the week, as reported by Taylor and Fawce (2001).…”

Section: A Model With Search-and-matching Frictions In the Goods Marketmentioning

confidence: 99%

State Dependence of Fiscal Multipliers: The Source of Fluctuations Matters

Ghassibe

Zanetti

2020

SSRN Journal

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We develop a general theory of state-dependent scal multipliers in a framework featuring interaction between two empirically relevant goods market frictions: idle productive capacity and unsatis ed demand. Our key novel nding is that the source of economic uctuations determines the cyclicality of scal multipliers. Policies that stimulate aggregate demand, such as government spending and consumption tax cuts, have multipliers that are large in demanddriven recessions, but small and possibly negative in supply-driven downturns. On the other hand, policies that boost aggregate supply, such as cuts in taxes on labor income and rms' payroll and sales, are ine ective in demanddriven recessions, but powerful if the downturn is driven by supply factors. Spending austerity, implemented by a reduction in government consumption, can be the policy with the largest multiplier in severe supply-side recessions and demand-driven booms, provided elasticities of labor demand and supply are su ciently low. We obtain modelfree empirical support for our theoretical predictions by using a novel econometric speci cation that allows us to estimate spending and tax cut multipliers in recessionary and expansionary episodes, conditional on those being either demand-or supply-driven.

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Aggregate Demand, Idle Time, and Unemployment

Cited by 10 publications

References 64 publications

General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

The “Matthew Effect” and Market Concentration: Search Complementarities and Monopsony Power

State Dependence of Fiscal Multipliers: The Source of Fluctuations Matters

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