Returns to Scale in U.S. Production: Estimates and Implications

Fiscal Calculus and the Labor Market

“…Following Basu and Fernald (1997), the value added mark-up of prices over marginal cost is set to 0.2. This generates a value for the price elasticity of demand ε of 6.…”

Measuring the Cyclicality of Real Wages: How Important is Aggregation Across Industries?

“…Sectoral value-added de ators also appear to be extremely noisy, substantially more so than sectoral gross output and input prices. I conclude, like Basu and Fernald 1997 , that any results using sectoral value-added data should be regarded with a great deal of suspicion. Future studies should avoid using these data, in favor of gross output and input prices, if at all possible.…”

Economies of Scale in Banking, Confidence Shocks, and Business Cycles

“…First, with the size of the intermediary sector calibrated to US data (a value added of approximately 1 percent of output), indeterminacy arises for small degrees of ES in the intermediation sector without the need for multiple productive sectors or unusual parameter values. 2 Second, since sunspot shocks and monetary shocks both in ‡uence the trade o¤ between inside and outside money balances, the real response of these shocks are qualitatively similar. Third, monetary policies are able to assuage the real (but not nominal) impact of sunspot shocks, but only when the monetary authority has complete information.…”

“…Using a simple monetary environment along the lines of Carlstrom and Feurst (2001), the main results of Dressler (2009a) was that equilibrium indeterminacy does not depend on a large degree of ES in intermediation nor a large intermediation sector. What indeterminacy does depend on is monetary policy and 2 The degree of increasing returns needed for indeterminacy in environments with one sector of production [e.g. Farmer and Guo (1994) and Gali (1994)] far exceeds the estimates of Basu and Fernald (1997).…”

“…What indeterminacy does depend on is monetary policy and 2 The degree of increasing returns needed for indeterminacy in environments with one sector of production [e.g. Farmer and Guo (1994) and Gali (1994)] far exceeds the estimates of Basu and Fernald (1997). Furthermore, Farmer (1993) shows that indeterminacy arises in cash-in-advance economies only for weak degrees of intertemporal substitution.…”