Quantitative Macro with Heterogeneity
University of Toronto
Topics in Macroeconomic Theory:
Quantitative Macro with Heterogeneity
ECO2103H 2018 Winter
Reading List PDF Version Weekly Course Schedule
Announcements
Jan 12: If you haven't joined the Slack group, please do so ASAP. Email me for an invitation link.
Jan 10: Outline is posted.
Presentations
Instructor
Serdar Ozkan: serdar.ozkan[at].utoronto.ca
Lectures: Wednesdays, 4-6pm, at GE100
Office Hours: By appointment at GE230
Course Description
This course covers the topics at the nexus of macro and labor economics with an emphasis on household heterogeneity. The main goals of this course are to expose students to research questions at the current frontier, discuss a variety of open questions in this area that can lead to research papers (or possibly to a dissertation), and familiarize with the tools necessary to tackle these questions. We cover the research that links theoretical models to the data in a serious manner using quantitative and empirical methods.
Course Requirements
Weekly Referee Report. Every week you will write a no longer than 1 page referee report on one paper from that week’s selected papers list below. In one third or half of the report you will summarize the main contribution of the paper. In the rest of the report you will discuss its main weakness(es) and/or strength(s) to justify your recommendation to the editor. As an economist, it is very important that you can communicate your ideas clearly and concisely. Thus, you will also discuss your referee report in the class in not more than two minutes.
Literature Review. You will present a topic from the reading list which you’re particularly interested in and consider doing research in (if your area of interest is not included in the tentative reading list you can talk to me). In particular, you will introduce the key stylized facts and important questions and issues in this literature and critically discuss 3 or 4 of the most important papers. Finally, and more importantly, you will talk about open questions by explaining why they are still not satisfactorily answered, what the limitations are in addressing these questions. In your presentation, you will take questions from the class and answer them. While preparing for this assignment you will meet with me regularly at least once a week.
Research Proposal. The research proposal should outline a clear research question and describe how you intend to answer the question posed (which data set you would use, a description of the model, the algorithm for solving it, etc). The proposal will be judged based on the originality of the idea (or the importance of the contribution), the feasibility of the exercise and how specific and detailed the proposal is. An ideal proposal would be one where someone else could take it and follow the steps you describe to answer the question.
Weekly Schedule, Selected Papers and Slides
Week #1: Introduction
• “Quantitative Macroeconomics with Heterogeneous Households,” Jonathan Heathcote, Kjetil Storesletten, and Gianluca Violante, Annual Review of Economics, 2009.
• “Macroeconomics with Heterogeneity: A User’s Guide,” Fatih Guvenen, Federal Reserve Bank of Richmond Economic Quarterly, 2011.
• Cristiano, Lawrance, Martin Eichenbaum and Mathias Trabandt (2017). "On DSGE Models”
Week #2 and 3: Individual Income Fluctuations
• Guvenen, Fatih, Fatih Karahan, Serdar Ozkan and Jae Song (2016): “What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Dynamics?”
• Arellano, M., Blundell, R. and Bonhomme, S. (2017). “Earnings and Consumption Dynamics: A Nonlinear Panel Data Framework.” ECMA
• Altonji, Joseph G., Anthony A. Smith, and Ivan Vidangos. "Modeling earnings dynamics." Econometrica 81, no. 4 (2013): 1395-1454.
• Browning, Martin, Mette Ejrnaes, and Javier Alvarez: “Modelling Income Processes with Lots of Heterogeneity,” Review of Economic Studies, 2010.
Week #4 and #5: Wage Inequality Over the Life Cycle
• Bagger, Jesper, et al. "Tenure, experience, human capital, and wages: A tractable equilibrium search model of wage dynamics." The American Economic Review 104.6 (2014): 1551-1596.
• Bronson, Mary A and Peter S Thoursie, The Lifecycle Wage Growth of Men and Women: Explaining Gender Differences in Wage Trajectories, 2017
• Andreas Hornstein, Per Krusell, and Giovanni L Violante. Frictional wage dispersion in search models: A quantitative assessment. AER
• Kuruscu, Burhanettin (2006): “Training and Lifetime Income, American Economic Review, Vol. 96
• Kambourov and Manovskii (2009): “Occupational Mobility and Wage Inequality,” Review of Economic Studies.
Week #6: Trends in Inequality
• Guvenen, Fatih, Greg Kaplan, Jae Song, Justin Weidner. Lifetime Incomes in the United States over Six Decades
• Song, Jae, David J. Price, Fatih Guvenen, Nicholas Bloom, and Till Von Wachter. Firming up inequality. No. w21199. National Bureau of Economic Research, 2015.
• Autor, David H., Lawrence F. Katz, and Melissa S. Kearney. "Trends in US wage inequality: Revising the revisionists." The Review of economics and statistics 90, no. 2 (2008): 300-323.
• Per Krusell, Lee Ohanian, Jose-Victor Ríos-Rull and Gianluca Violante (2000). Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis, Econometrica
• Acemoglu, Daron and Pascual Restrepo, (2018), "Artificial Intelligence, Automation and Work" NBER working paper #24196
Week #7: Decline in Labor Income Share and Increase in Markups
• Stephen's Slides on Decline in Labor Share
• Maryn's Slides on Increase in Markups
• De Loecker, Jan, and Jan Eeckhout. The rise of market power and the macroeconomic implications. NBER No. w23687, 2017.
• Koh, Dongya, Raül Santaeulàlia-Llopis, and Yu Zheng. "Labor share decline and intellectual property products capital." (2016).
• Barkai, Simcha. "Declining labor and capital shares." Stigler Center for the Study of the Economy and the State New Working Paper Series 2 (2016).
• Eggertsson, Gauti B., Jacob A. Robbins, and Ella Getz Wold. Kaldor and Piketty’s Facts: The Rise of Monopoly Power in the United States. No. w24287. National Bureau of Economic Research, 2018.
Week #8: Decline in Worker Fluidity and Scarring Effects of Job Losses
• Sedat's Slides on Decline in Worker Dynamism and Entrepreneurship
• Frank's Slides on Scarring Effects of Unemployment
• Jarosch (2017) “Searching for Job Security and the Consequences of Job Loss.” ECMA.
• Krolikowski, P. (2017). Job ladders and earnings of displaced workers. American Economic Journal: Macroeconomics, 9(2), 1-31.
• von Wachter, T., J. Schmieder, and S. Bender. "The Effect of Unemployment Insurance and Nonemployment Duration on Wages." American Economic Review, (2015).
• Engbom, Niklas. Firm and Worker Dynamics in an Aging Labor Market. Working Paper, 2017.
Salgado, Sergio. "Technical Change and Entrepreneurship." (2017).
• Joonkyu Choi (2017), "Entrepreneurial Risk-Taking, Young Firm Dynamics,and Aggregate Implications"
Week #9: Wealth Inequality and Consumption Insurance
• Baxter's Slides on Wealth Inequality
• Kevin's Slides on Consumption Insurance
• De Nardi, M., G. Fella, and G. P. Pardo (2018). Nonlinear Household Earnings Dynamics, Self-insurance, and Welfare. NBER Working Paper Series 2436.
• Benhabib, J., A. Bisin, and M. Luo (2017). Wealth distribution and social mobility in the US: A quantitative approach.
• C. Boar. (2017) “Dynastic Precautionary Savings”.
• Kaplan, Greg, and Giovanni L. Violante. "A model of the consumption response to fiscal stimulus payments." Econometrica 82.4 (2014): 1199-1239.
Week #10: Housing Boom and Bust---Default and Foreclosures
• Wanlin's Slides on Housing Boom and Bust
• Amina's Slides on Housing and Foreclosures
• Kaplan, Greg, Kurt Mitman, and Gianluca Violante. "The Housing Boom and Bust: Model Meets Evidence" Manuscript, (2017).
• Mian, Atif, and Amir Sufi. "The consequences of mortgage credit expansion: Evidence from the US mortgage default crisis." The Quarterly Journal of Economics 124, no. 4 (2009): 1449-1496.
• Stefania Albanesi , Giacomo De Giorgi and Jaromir Nosal (2017) "Credit Growth and the Financial Crisis: A New Narrative."
• Corbae, Dean, and Erwan Quintin. "Leverage and the foreclosure crisis." Journal of Political Economy 123, no. 1 (2015): 1-65.
• Hedlund, A. (2016): “The Cyclical Dynamics of Illiquid Housing, Debt, and Foreclosures,” Quantitative Economics, 7, 289–328.
• Favilukis, J., S. C. Ludvigson, and S. Van Nieuwerburgh (2017): “The Macroeconomic Effects of Housing Wealth, Housing Finance, and Limited Risk Sharing in General Equilibrium,” Journal of Political Economy, 125, 140–223.
Week #11: Growth with Worker Heterogeneity and Liquidity Trap in Great Recession
• Bartosz's Slides on Talent Misallocation
• Steven's Slides on Liquidity Trap in Great Recession
• Perri, F., & Quadrini, V. (2017). International recessions. AER
• Guerrieri, Veronica, and Guido Lorenzoni. "Credit crises, precautionary savings, and the liquidity trap." The Quarterly Journal of Economics 132.3 (2017): 1427-1467.
• Hsieh, Chang-Tai, Erik Hurst, Charles I. Jones, and Peter J. Klenow. The allocation of talent and us economic growth. No. w18693. National Bureau of Economic Research, 2013.
Week #12: HANK Models
• McKay, Alisdair, Emi Nakamura, and Jon Steinsson, “The Power of Forward Guidance Revisited,” American Economic Review, 2016, 106 (10), 3133–3158.
• Kaplan, G., Moll, B. and Violante, G. (2016). Monetary policy according to hank.
• Wong, Arlene. Transmission of Monetary Policy to Consumption and Population Aging. mimeo, April 21, Princeton University, Princeton, 2016.
• Gornemann, Nils, Keith Kuester, and Makoto Nakajima. "Doves for the rich, hawks for the poor? distributional consequences of monetary policy." (2016).