Dissertation

• Title: Essays on International Macroeconomic Aspects of Saving, Housing, and Labor Supply

• Advisor: Mark A. Aguiar

Curriculum Vitae [PDF]

Research Papers

Growth and Global Imbalances: The Role of Learning-by-Exporting (Job Market Paper) [PDF] 

Rapidly growing developing economies like China and other Asian countries have exported heavily and run current account surpluses. Empirical studies suggest that “learning-by-exporting” (exporters’ productivity improvement accompanied by increased exports) may be quantitatively large in developing countries. A popular view is that export-led growth may be behind some of these dramatic Asian miracles. This paper attempts to explore if learning-by-exporting helps explain the key macroeconomic behavior of fast growing developing countries. This paper also examines what policies exploit learning-by-exporting, their implications for aggregates like the current account and the real exchange rate, the welfare consequences for the growing economy and the rest of the world, and if restricting the set of policies to non-trade related policies matter.

In order to answer these questions, this paper builds up a two country general equilibrium growth model in which a developing economy benefits from learning-by-exporting as it trades with a developed economy. As the benchmark, I consider a setup in which the policies are restricted to non-trade related ones by the World Trade Organization (WTO). In this benchmark model, the optimal policy for the country is to tax non-traded goods consumption and subsidize savings, which shifts labor into the tradable sector and suppresses consumption to increase exports. These policies generate the simultaneous fast growth and current account surpluses observed in the data. These policies improve the welfare of the developing country relative to a “No Policy” competitive equilibrium because the developing economy benefits from rapid growth due to learning-by-exporting. However, the welfare change of the developed country between the benchmark case and the "No Policy" economy is quantitatively modest.

If there were no WTO restrictions, the developing country has an incentive to manipulate its terms of trade rather than distort savings. Specifically, the developing country subsidizes exports to reduce its consumption of the export good and increase consumption of the import good. This policy generates a large deterioration in the developing economy’s terms of trade and reverses the prediction for the current account. In particular, the developing economy now runs a current account deficit as it no longer relies heavily on the savings distortion to promote exports. These policies raise the welfare of both countries relative to the benchmark model as it generates faster economic growth in the developing economy and improvement of the terms of trade in the developed economy, highlighting the fact that terms of trade manipulation can be “win-win” in the presence of learning-by-exporting. This paper also considers a “Coordinated Policy” problem to obtain the optimal policies for both developing and developed countries. In this setup, the developing country’s terms of trade deteriorate even more and it runs a greater current account deficit relative to the “No-WTO Restrictions” case. This large deterioration of the developing country’s terms of trade causes its real exchange rate to be undervalued. These policies reduce welfare of the developing country and increase that of the developed country relative to the “No-WTO Restrictions” case.

In summary, the optimal policies in the presence of WTO restrictions rationalize the observed current account surpluses of rapidly growing developing economies. However, if there are no WTO restrictions, the developing countries would manipulate their terms of trade rather than their current account, which improves the welfare of both developing and developed countries. 

Wage Volatility and Changing Patterns of Labor Supply (with Jay H. Hong and Hye Mi You) [PDF]

For the past four decades in the U.S., relative labor supply of skilled men to unskilled men has increased in spite of the rising college premium. This fact is in sharp contrast with previous studies supporting dominant income effects in the trends in hours worked before the 1970s. This paper attempts to explain these recent changing patterns of labor supply using the different evolution of the second moment of wages, namely, wage volatility. Using the PSID, we document that wage volatility rose for overall skill groups with even greater increases for skilled men than for unskilled men in recent decades. As wages become more volatile, individuals not only accumulate more precautionary savings but also increase work hours. This paper develops a general equilibrium incomplete markets model, where heterogeneous agents receive productivity shocks drawn from skill-specific distribution. With the rising college premium and increased wage volatility for both skill groups which we estimate using the U.S. data, the model can replicate the trends in work hours of each skill group along with the increases in skilled-unskilled hours differentials.

Explaining the Evolution of the U.S. Housing Market [PDF]

Cross-Country Differences in Housing Markets and Global Imbalances (Work in Progress)