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Christina Patterson

Bio: Christina Patterson is an academic researcher from Northwestern University. The author has contributed to research in topics: Wage share & Forward guidance. The author has an hindex of 12, co-authored 18 publications receiving 1908 citations. Previous affiliations of Christina Patterson include University of Chicago & Federal Reserve Bank of New York.

Papers
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Journal ArticleDOI
TL;DR: In this paper, the authors analyzed micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of ''superstar firms''.
Abstract: The fall of labor's share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments of trends in labor's share typically have relied on industry or macro data, obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of \superstar firms." If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm valueadded and sales. As the importance of superstar firms increases, the aggregate labor share will tend tofall. Our hypothesis offers several testable predictions: industry sales will increasingly concentrate in a small number of firms; industries where concentration rises most will have the largest declines in the labor share; the fall in the labor share will be driven largely by between-firm reallocation rather than (primarily) a fall in the unweighted mean labor share within firms; the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; and finally, such patterns will be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.

676 citations

Posted Content
TL;DR: In this paper, the authors analyzed micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of "superstar firms."
Abstract: The fall of labor's share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments of trends in labor's share typically have relied on industry or macro data, obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of "superstar firms." If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm value-added and sales. As the importance of superstar firms increases, the aggregate labor share will tend to fall. Our hypothesis offers several testable predictions: industry sales will increasingly concentrate in a small number of firms; industries where concentration rises most will have the largest declines in the labor share; the fall in the labor share will be driven largely by between-firm reallocation rather than (primarily) a fall in the unweighted mean labor share within firms; the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; and finally, such patterns will be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.

587 citations

Journal ArticleDOI
TL;DR: In this article, the authors discuss an explanation for the fall in share of labour in GDP based on the rise of "superstar firms" and find that sales will increasingly concentrate in a small number of firms and that industries where concentration rises most will have the largest declines in the labour share.
Abstract: In this paper, we discuss an explanation for the fall in share of labour in GDP based on the rise of “superstar firms.” If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profit margins and a low share of labor in firm value-added and sales. As the importance of superstar firms increases, the aggregate labour share will fall. This hypothesis suggeststhat sales will increasingly concentrate in a small number of firms and that industries where concentration rises most will have the largest declines in the labour share. We find support for these predictions aggregating up micro-data from the US Census 1982-2012.

430 citations

Journal ArticleDOI
TL;DR: In this paper, the authors explain why this is the case and describe one approach to addressing this issue. But they also point out that standard medium-scale DSGE models tend to grossly overestimate the impact of forward guidance on the macroeconomy.
Abstract: With short-term interest rates at the zero lower bound, forward guidance has become a key tool for central bankers, and yet we know little about its effectiveness. Standard medium-scale DSGE models tend to grossly overestimate the impact of forward guidance on the macroeconomy — a phenomenon we call the “forward guidance puzzle.” We explain why this is the case and describe one approach to addressing this issue.

400 citations


Cited by
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Journal ArticleDOI
TL;DR: Author(s): Livingston, Gill; Huntley, Jonathan; Sommerlad, Andrew ; Sommer Glad, Andrew; Ames, David; Ballard, Clive; Banerjee, Sube; Brayne, Carol; Burns, Alistair; Cohen-Mansfield, Jiska; Cooper, Claudia; Costafreda, Sergi G; Dias, Amit; Fox, Nick; Gitlin, Laura N; Howard, Robert; Kales, Helen C;

3,559 citations

Journal ArticleDOI
TL;DR: In this paper, the authors analyzed micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of ''superstar firms''.
Abstract: The fall of labor's share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments of trends in labor's share typically have relied on industry or macro data, obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of \superstar firms." If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm valueadded and sales. As the importance of superstar firms increases, the aggregate labor share will tend tofall. Our hypothesis offers several testable predictions: industry sales will increasingly concentrate in a small number of firms; industries where concentration rises most will have the largest declines in the labor share; the fall in the labor share will be driven largely by between-firm reallocation rather than (primarily) a fall in the unweighted mean labor share within firms; the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; and finally, such patterns will be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.

676 citations

ReportDOI
TL;DR: In this article, the authors present a theory of Keynesian supply shocks: supply shocks that trigger changes in aggregate demand larger than the shocks themselves, and argue that the economic shocks associated to the COVID-19 epidemic may have this feature.
Abstract: We present a theory of Keynesian supply shocks: supply shocks that trigger changes in aggregate demand larger than the shocks themselves. We argue that the economic shocks associated to the COVID-19 epidemic—shutdowns, layoffs, and firm exits—may have this feature. In one-sector economies supply shocks are never Keynesian. We show that this is a general result that extend to economies with incomplete markets and liquidity constrained consumers. In economies with multiple sectors Keynesian supply shocks are possible, under some conditions. A 50% shock that hits all sectors is not the same as a 100% shock that hits half the economy. Incomplete markets make the conditions for Keynesian supply shocks more likely to be met. Firm exit and job destruction can amplify the initial effect, aggravating the recession. We discuss the effects of various policies. Standard fiscal stimulus can be less effective than usual because the fact that some sectors are shut down mutes the Keynesian multiplier feedback. Monetary policy, as long as it is unimpeded by the zero lower bound, can have magnified effects, by preventing firm exits. Turning to optimal policy, closing down contact-intensive sectors and providing full insurance payments to affected workers can achieve the first-best allocation, despite the lower per-dollar potency of fiscal policy.

675 citations

Journal ArticleDOI
TL;DR: In this article, the authors revisited the transmission mechanism from monetary policy to household consumption in a Heterogeneous Agent New Keynesian (HANK) model and found that the indirect effects of an unexpected cut in interest rates, which operate through a general equilibrium increase in labor demand, far outweigh direct effects such as intertemporal substitution.
Abstract: We revisit the transmission mechanism from monetary policy to household consumption in a Heterogeneous Agent New Keynesian (HANK) model. The model yields empirically realistic distributions of wealth and marginal propensities to consume because of two features: uninsurable income shocks and multiple assets with different degrees of liquidity and different returns. In this environment, the indirect effects of an unexpected cut in interest rates, which operate through a general equilibrium increase in labor demand, far outweigh direct effects such as intertemporal substitution. This finding is in stark contrast to small- and medium-scale Representative Agent New Keynesian (RANK) economies, where the substitution channel drives virtually all of the transmission from interest rates to consumption. Failure of Ricardian equivalence implies that, in HANK models, the fiscal reaction to the monetary expansion is a key determinant of the overall size of the macroeconomic response.

591 citations