https://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf

The future of employment: How susceptible are jobs to computerisation?

The author systematically examines one of the important issues of information — establishing the market price. He introduces the concept of «search» — where a buyer wanting to get a better price, is forced to question sellers. The article deals with various aspects of finding the necessary information.

Economics of Information

I develop a general equilibrium model with sticky prices, credit constraints, nominal loans and asset prices. Changes in asset prices modify agents’ borrowing capacity through collateral value; changes in nominal prices affect real repayments through debt deflation. Monetary policy shocks move asset and nominal prices in the same direction, and are amplified and propagated over time. The “financial accelerator” is not constant across shocks: nominal debt stabilises supply shocks, making the economy less volatile when the central bank controls the interest rate. I discuss the role of equity, debt indexation and household and firm leverage in the propagation mechanism. Finally, I find that monetary policy should not target asset prices as a means of reducing output and inflation volatility.

/pdf/house-prices-borrowing-constraints-and-monetary-policy-in-53saibtjbe.pdf

House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

/pdf/the-economic-importance-of-financial-literacy-theory-and-17mb1g4cfb.pdf

The Economic Importance of Financial Literacy: Theory and Evidence

A common approach to evaluating robustness to omitted variable bias is to observe coefficient movements after inclusion of controls. This is informative only if selection on observables is informative about selection on unobservables. Although this link is known in theory in existing literature, very few empirical articles approach this formally. I develop an extension of the theory that connects bias explicitly to coefficient stability. I show that it is necessary to take into account coefficient and R-squared movements. I develop a formal bounding argument. I show two validation exercises and discuss application to the economics literature. Supplementary materials for this article are available online.

/pdf/unobservable-selection-and-coefficient-stability-theory-and-1r9lpwnnl2.pdf

Unobservable Selection and Coefficient Stability: Theory and Evidence

https://link-springer-com-443.webvpn.jmu.edu.cn/content/pdf/10.1057%2F978-1-349-95121-5_2801-1.pdf

Permanent-Income Hypothesis

Using data from the Panel Study of Income Dynamics (PSID), this paper studies the degree to which spouses sort in the marriage market on the basis of parental wealth. We estimate a variety of models, including transition matrices, OLS and TSLS models to deal with measurement error in wealth reports. Our various results show that men and women in the U.S. marry spouses whose parents have wealth similar to that of their own parents; and are very unlikely to marry persons from very different parental wealth backgrounds. This effect is present in the population as a whole, within racial groups, and especially in the tails of the distribution. Our preferred estimates indicate that the correlation in log wealth between own and spouse's parents wealth is around 0.4. We show that education accounts for only one-quarter of this sorting, and also show that selection into and out marriage by parental wealth does not appreciably bias our results.

Marital Sorting and Parental Wealth

We show that behind the well-known hump-shaped lifecycle profile of expenditure lies a pronounced hump in the prices paid for identical goods over the lifecycle. We combine this fact with detailed time use data on shopping and home production to estimate a model that replicates the lifecycle profile of expenditure but implies a pattern of consumption consistent with the standard permanent income model. A key innovation of this paper is the use of detailed scanner data of actual prices paid. We find strong evidence that there is large heterogeneity in prices paid across households for identical consumption goods in the same metro area at any given point in time. We show that the heterogeneity in prices paid corresponds directly with the household’s opportunity cost of time. Moreover, the cross-sectional dispersion of purchase prices for identical goods peaks in middle age, consistent with the hypothesis that shopping intensity is lowest when the cost of time is highest. Such differences in prices can explain a hump shaped profile in expenditure without relying on households being myopic, liquidity constrained, or impatient. We use our scanner data, coupled with time use data, to estimate both shopping and home production functions. The data suggest that a doubling of shopping frequency lowers a good’s price by 15%. From this elasticity and observed shopping intensity, we can impute an opportunity cost of time for the shopper. We find that the price of time peaks in middle age at roughly 35% higher than retirees. Moreover, we estimate an elasticity of substitution between time and goods in home production of close to two. We use these estimated functions to augment a standard PIH consumption model which replicates the hump shaped profile in expenditure, the hump shaped profile in prices paid, the large decline in expenditure during retirement, and observed patterns of time use over the life cycle. ∗ mark.aguiar@bos.frb.org, erik.hurst@gsb.uchicago.edu. We are particularly grateful to Jean-Pierre Dube for assistance with the Homescan database.

/pdf/consumption-expenditure-and-home-production-over-the-k62j6viy62.pdf

Consumption, Expenditure, and Home Production over the Lifecycle

In this paper, we exploit new data to assess gender differences in pre-labor market specialization among the college educated and highlight how those differences have evolved over time. We highlight new results pertaining to gender differences in the mapping between undergraduate major and subsequent occupational sorting. To perform our analysis, we introduce new indices in potential wage space that measure gender differences in major choice and separately the subsequent occupational sorting conditional on major choice. We highlight that women both choose majors with lower potential earnings (based on male wages associated with those majors) and that they then subsequently sort into occupations with lower potential earnings given their major choice. We highlight that these differences have narrowed over time but recent cohorts of women still choose majors and occupations with lower potential earnings. Differences in undergraduate major choice explains a substantive portion of gender wage gaps for the college educated above and beyond simply controlling for occupation. Collectively, our results highlight the importance of understanding gender differences in pre-labor market human capital specialization and the mapping between college major and occupational sorting when studying the evolution of gender differences in labor market outcomes over time.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

/pdf/a-cross-cohort-analysis-of-human-capital-specialization-and-5bg5c6f9va.pdf

A Cross-Cohort Analysis of Human Capital Specialization and the College Gender Wage Gap

Using data from three different surveys, we report several important facts about entrepreneurship and household savings. Moreover, we show that the propensity to become a business owner in the United States is a non-linear function of wealth. The relationship between wealth and entry into entrepreneurship is essentially flat over the majority of the wealth distribution. It is only at the top of the wealth distribution - after the 95th percentile - that a positive relationship can be found. Segmenting businesses into industries with high and low starting capital requirements, we find no evidence that wealth matters more for businesses requiring higher initial capital. We also exploit the regional variation in house prices as an instrument for liquidity. Households who lived in regions where housing prices appreciated strongly were no more likely to start a business than households in other regions. Not only household wealth but also parental wealth has not effect on business formation. Moreover, wealth has no effect on business survival. Thus, while liquidity constraints may be important for some households, they are not a major impediment to small business formation and business success in the United States.

Erik Hurst

Papers

Permanent-Income Hypothesis

Marital Sorting and Parental Wealth

Consumption, Expenditure, and Home Production over the Lifecycle

A Cross-Cohort Analysis of Human Capital Specialization and the College Gender Wage Gap

Do Household Savings Encourage Entrepreneurship? Household Wealth, Parental Wealth, and the Transition in and Out of Entrepreneurship