Medium Run Redux

McAdam, Peter; Willman, Alpo

doi:10.1017/s1365100511000459

Cited by 57 publications

(53 citation statements)

References 55 publications

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“…Some of the income earned by self-employed workers clearly represents labor income, while some represents a return on investment or economic profit. Following Blanchard (1997), Gollin (2002), Klump et al (2007), and McAdam and Willman (2013) we use compensation per employee as a shadow price of labor of self-employed workers: 9…”

Section: Datamentioning

confidence: 99%

Unraveling the Skill Premium

McAdam

Willman

2017

Macroecon. Dynam.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractFor the US the supply and wages of skilled labor relative to those of unskilled labor have grown over the postwar period. The literature has tended to explain this through "skill-biased technical change". Empirical work has concentrated around two variants:(1) Capital-skill complementarity, and (2) Skill-augmenting technical change. Our purpose is to nest and discriminate between these two explanations. We do so in the framework of 2-and 3-level CES production function where factors are disaggregated into skilled and unskilled labor, and the capital stock into structures and equipment capital. Using a 5-equation system approach and several nesting alternatives, we retrieve estimates of the elasticities of substitution and factor augmenting technical changes. Non-technical summaryFor the US and many other countries, the relative supply of skilled labor has grown markedly over the post-war period. Despite this expansion of supply, there has a large increase in the real wages of skilled labor relative to unskilled labor. This wedge is what we call the skill premium. How might we explain this phenomenon? The literature has tended to explain this through "skill-biased technical change". In particular, empirical work has concentrated around two variants: (1) Capital-skill complementarity, and (2) Skill-augmenting technical change. This does not preclude other explanations (off shorting, de-unionization etc.). But it does tend to view those alternative explanations through the lens of these two channels. Taking these two channels, our purpose is essentially to nest and discriminate between these two explanations. We do so in the framework of 2-and 3-level CES production function where input factors of production are disaggregated into finer components. For labor this disaggregation is into skilled and unskilled labor, and, for the capital stock, into structures and equipment capital. We derive the five non-linear equation system with cross-equation constraints. We estimate them under different assumptions on how the four factors and technical change augmenting them are combined in three-and two-level CES production functions. We retrieve estimates of the elasticities of substitution and factor augmenting technical changes. Our framework allows us to decompose in each case the level and growth rate of the skill premium into three separate channels: (1) capital-skill complementarity, (2) technical change channels as well as (3) ...

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Section: Datamentioning

confidence: 99%

Unraveling the Skill Premium

McAdam

Willman

2017

Macroecon. Dynam.

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“…This is along the lines of Antràs (2004) and McAdam and Willman (2013). Then, we add the possibility of product demand uncertainty in the spirit of Andrés et al (1990aAndrés et al ( , 1990b, Fagnart et al (1999) and Bontempi et al (2010).…”

Section: Analytical Frameworkmentioning

confidence: 99%

“…The empirical measurement of factor-biased technological change is a critical issue -see, among many others, Antràs (2004), León-Ledesma et al (2010,2013), and McAdam and Willman (2013). In this context, making a priori assumptions about the form of technical progress (e.g.…”

Section: Factor-biased Technical Changementioning

confidence: 99%

“…Acemoglu (2003) and McAdam and Willman (2013) suggest that although technical progress is labor-augmenting along the BGP, it can be capital-augmenting in mediumrun transitions away from the BGP. With an elasticity of substitution between labor and capital different from unity, this pattern allows for long-run asymptotic stability of factor shares and, also, for a non-stationary evolution in the medium-run, which we actually observe in reality.…”

Section: Factor-biased Technical Changementioning

confidence: 99%

“…To investigate on the determinants of capital intensity, we depart from a standard Constant Elasticity of Substitution (CES) model -along the lines, among others, of Antràs (2004) and McAdam and Willman (2013)-and relax the assumptions of perfect competition and perfect information. In this way, we force firms to deal with product demand uncertainty, which they do by adjusting their degree of factor utilization ex post, once investment decisions have already been made.…”

Section: Introductionmentioning

confidence: 99%

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The determinants of capital intensity in Japan and the US

Judzik

Sala

2015

Journal of the Japanese and International Economies

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We estimate the determinants of capital intensity in Japan and the US, characterized by striking different paths. We augment an otherwise standard Constant Elasticity of Substitution (CES) model with demand-side considerations, which we find especially relevant in the US. In this augmented setting, the elasticity of substitution between capital and labor is placed around 0.85 in Japan, and 0.30 in the US. We also find evidence of biased technical change, which is capital-saving in Japan but labor-saving in the US. These differences help us explain the diverse experience in the capital deepening process of these economies, and lead us to conclude that demand-side drivers may also be relevant to account for different growth experiences. A close look at the nature of technological change is also needed before designing one-size-fits-all industrial, economic growth, and/or labor market policies.JEL Classification: E22, E24, O33.

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In Search of the Transmission Mechanism of Fiscal Policy in the Euro Area

Fève

Sahuc

2016

J of Applied Econometrics

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This paper applies the DSGE-VAR methodology to assess the size of fiscal multipliers in the data and the relative contributions of two transmission mechanisms of government spending shocks, namely hand-to-mouth consumers and Edgeworth complementarity. Econometric experiments show that a DSGE model with Edgeworth complementarity is a better representation of the transmission mechanism of fiscal policy as it yields dynamic responses close to those obtained with the flexible DSGE-VAR model (i.e. an impact output multiplier larger than one and a crowding-in of private consumption). The estimated share of hand-to-mouth consumers is too small to replicate the positive response of private consumption.

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Medium Run Redux

Cited by 57 publications

References 55 publications

Unraveling the Skill Premium

Unraveling the Skill Premium

The determinants of capital intensity in Japan and the US

In Search of the Transmission Mechanism of Fiscal Policy in the Euro Area

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