American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Front Matter i ii http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.i 10.1257/mac.3.2.i American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Intermediate Goods and Weak Links in the Theory of Economic Development Charles I.JonesStanford U 1 28 What explains the enormous differences in incomes across countries? This paper returns to two old ideas: linkages and complementarity. First, linkages between firms through intermediate goods deliver a multiplier similar to the one associated with capital in a neoclassical growth model. Because the intermediate goods share of output is about one-half, this multiplier is substantial. Second, just as a chain is only as strong as its weakest link, problems along a production chain can sharply reduce output under complementarity. These forces considerably amplify distortions to the allocation of resources, bringing us closer to understanding large income differences across countries.(JEL: D57, E23, O1O, O47) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.1 10.1257/mac.3.2.1 http://www.aeaweb.org/aej/mac/data/2010-0015_data.zip http://www.aeaweb.org/aej/mac/app/2010-0015_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Growth Accounting with Misallocation: Or, Doing Less with More in Singapore JohnFernaldFederal Reserve Bank of San Francisco BrentNeimanU Chicago 29 74 We show that in a two-sector economy with heterogeneous capital subsidies and monopoly power, primal and dual measures of TFP growth can diverge from each other as well as from true technology. These distortions give rise to dynamic reallocation effects that imply technology growth needs to be measured from the bottom up rather than from the top down. Using Singapore as an example, we show how incomplete data can be used to estimate aggregate and sectoral technology growth as well as reallocation effects. Our framework can reconcile divergent TFP estimates in Singapore and can resolve other empirical puzzles regarding Asian development. (JEL E22, E23, E25, O33, O41, O47) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.29 10.1257/mac.3.2.29 http://www.aeaweb.org/aej/mac/data/2009-0107_data.zip American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article How Sovereign Is Sovereign Credit Risk? Francis A.LongstaffUCLA JunPanMIT Lasse H.PedersenNYU Kenneth J.SingletonStanford U 75 103 We study the nature of sovereign credit risk using an extensive set of sovereign CDS data. We find that the majority of sovereign credit risk can be linked to global factors. A single principal component accounts for 64 percent of the variation in sovereign credit spreads. Furthermore, sovereign credit spreads are more related to the US stock and high-yield markets than they are to local economic measures. We decompose credit spreads into their risk premium and default risk components. On average, the risk premium represents about a third of the credit spread. (JEL F34, G15, O16, O19, P34) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.75 10.1257/mac.3.2.75 http://www.aeaweb.org/aej/mac/data/2009-0153_data.zip http://www.aeaweb.org/aej/mac/app/2009-0153_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Are Long-Run Inflation Expectations Anchored More Firmly in the Euro Area Than in the United States? Meredith J.BeecheySveriges Riksbank Benjamin K.JohannsenNorthwestern U Andrew T.LevinFederal Reserve Board 104 29 This paper compares the evolution of long-run inflation expectations in the euro area and the United States, using evidence from financial markets and surveys of professional forecasters. Survey data indicate that long-run inflation expectations are reasonably well anchored in both economies but reveal substantially greater dispersion across forecasters' long-horizon projections of US inflation. Analysis of daily data on inflation swaps and nominal-indexed bond spreads, which gauge compensation for expected inflation and inflation risk, also suggests that long-run inflation expectations are more firmly anchored in the euro area than in the United States. (JEL D84, E31, E37, E52, E58) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.104 10.1257/mac.3.2.104 http://www.aeaweb.org/aej/mac/data/2007-0059_data.zip American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Welfare-Based Optimal Monetary Policy with Unemployment and Sticky Prices: A Linear-Quadratic Framework FedericoRavennaInstitute of Applied Economics, HEC Montreal and U CA, Santa Cruz Carl E.WalshU CA, Santa Cruz 130 62 We derive a linear-quadratic model that is consistent with sticky prices and search and matching frictions in the labor market. We show that the second-order approximation to the welfare of the representative agent depends on inflation and "gaps" that involve current and lagged unemployment. Our approximation makes explicit how welfare costs are generated by the presence of search frictions. These costs are distinct from the costs associated with relative price dispersion and fluctuations in consumption that appear in standard new Keynesian models. We show the labor market structure has important implications for optimal monetary policy. (JEL E24, E31, E52) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.130 10.1257/mac.3.2.130 http://www.aeaweb.org/aej/mac/data/2009-0213_data.zip http://www.aeaweb.org/aej/mac/app/2009-0213_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Product Market Regulation and Market Work: A Benchmark Analysis LeiFangFederal Reserve Bank of Atlanta RichardRogersonPrinceton U 163 88 Recent empirical work finds a negative correlation between product market regulation and aggregate employment. We examine the effect of product market regulations on hours worked in a benchmark model of time allocation. Product market regulations affect market work in effectively the same fashion as labor or consumption taxes. For product market regulations to affect aggregate market work, the key driving force is the size of income transfers associated with the regulations, and the key propagation mechanism is the labor supply elasticity. We show that industry level analysis is of little help in assessing the aggregate effects of product market regulation. (JEL E24, J22, L51) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.163 10.1257/mac.3.2.163 http://www.aeaweb.org/aej/mac/app/2009-0062_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Did Improvements in Household Technology Cause the Baby Boom? Evidence from Electrification, Appliance Diffusion, and the Amish Martha J.BaileyU MI William J.CollinsVanderbilt U 189 217 We examine the hypothesis that advances in household technology caused the US baby boom, and we find no support for this claim. Advances in household technology occurred before the baby boom, while fertility declined. From 1940 to 1960, levels/changes in county-level appliance ownership and electrification negatively predict levels/changes in fertility rates. Exposure to electricity in early adulthood and children-ever-born are negatively correlated for the relevant cohorts. The Amish, who used modern technologies much less than other US households, experienced a coincident baby boom. This evidence can be reconciled with economic theory if other home-produced goods are substitutes with children. (JEL D12, J13, N32, N92, O33) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.189 10.1257/mac.3.2.189 http://www.aeaweb.org/aej/mac/data/2009-0130_data.zip http://www.aeaweb.org/aej/mac/app/2009-0130_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Family Firms and Labor Relations Holger M.MuellerNYU ThomasPhilipponNYU 218 45 This paper examines the relationship between family ownership and the quality of labor relations. We find that family ownership is more prevalent in countries in which labor relations are hostile, consistent with the notion that family firms are particularly effective at coping with difficult labor relations. Our results are robust to controlling for minority shareholder protection and other potential determinants of family ownership. To address endogeneity issues, we show that, controlling for industry- and country-fixed effects, industries that are more labor dependent have relatively more family ownership in countries with worse labor relations. (JEL G32, G34, J52, J53) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.218 10.1257/mac.3.2.218 http://www.aeaweb.org/aej/mac/data/2008-0049_data.zip http://www.aeaweb.org/aej/mac/app/2008-0049_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 3 2 April 2011 http://www.aeaweb.org/issue.php?journal=MAC&volume=3&issue=2 Journal Article Evaluating the Classification of Economic Activity into Recessions and Expansions Travis J.BergeU CA, Davis OscarJordaU CA, Davis 246 77 The Business Cycle Dating Committee of the National Bureau of Economic Research provides a historical chronology of business cycle turning points. We investigate three central aspects of this chronology. How skillful is the Dating Committee when classifying economic activity into expansions and recessions? Which indices of economic conditions best capture the current but unobservable state of the business cycle? And which indicators best predict future turning points, and at what horizons? We answer each of these questions in detail using methods specifically designed to assess classification ability. In the process, we clarify several important features of the business cycle. (JEL C82, E32) http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.246 10.1257/mac.3.2.246 http://www.aeaweb.org/aej/mac/data/2010-0056_data.zip http://www.aeaweb.org/aej/mac/app/2010-0056_app.pdf