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

DURING THE 1990s, the United States has experienced substantial economic growth in both family income and wealth. The rise in wealth has occurred despite the well-documented decline in traditional saving and investment since the mid1980s. However, because of the lack of panel data on the composition of individual wealth holdings, it has not so far been possible to analyze properly the changing patterns in household wealth accumulation or the distribution of these changes across the population. This paper introduces features of the comprehensive measures of wealth, saving, and income in the Michigan Panel Study of Income Dynamics (PSID), in particular, the supplements on household family wealth funded by the National Institute on Aging. These datacurrently available for 1984, 1989, and 1994-permit an improved understanding of a number of issues, such as generational differences in long-term saving and wealth accumulation, differences in the accumulation of wealth between African American and other households, regional differences in accumulation, and the importance for wealth

/pdf/the-wealth-dynamics-of-american-families-1984-94-2vdfce55mw.pdf

The wealth dynamics of American families, 1984-94

We revisit two well-known facts regarding life cycle expenditures: the “hump”-shaped profile of nondurable expenditures and the increase in cross-household consumption inequality. We document that the behavior of total nondurables masks surprising heterogeneity in the life cycle profile of individual consumption subcomponents. We provide evidence that the categories driving life cycle consumption either are inputs into market work or are amenable to home production. Using a quantitative model, we document that the disaggregated life cycle consumption profiles imply a level of uninsurable permanent income risk that is substantially lower than that implied by a model using a composite consumption good.

/pdf/deconstructing-life-cycle-expenditure-1esan1ixpt.pdf

Deconstructing Life Cycle Expenditure

A large literature shows that the self-employed underreport their income to tax authorities. In this paper, we quantify the extent to which the self-employed also systematically underreport their income in U.S. household surveys. We use the Engel curve describing the relationship between income and expenditures of wage and salary workers to infer the actual income, and thus the reporting gap, of the self-employed based on their reported expenditures. On average, the self-employed underreport their income by about 25%. We show that failing to account for such income underreporting leads to biased conclusions in a variety of settings.

/pdf/are-household-surveys-like-tax-forms-evidence-from-income-1tc69gzbgv.pdf

Are Household Surveys Like Tax Forms: Evidence from Income Underreporting of the Self-Employed

Standard tests of the permanent income hypothesis (PIH) using data on nondurables typically equate expenditures with consumption. However, as noted by Becker (1965), consumption is the output of a “home production” function that uses both expenditure and time as inputs. Individuals with lower values of time will spend more time on home production and less on market expenditures for a given unit of consumption. With this in mind, we revisit the retirement consumption puzzle by documenting that the dramatic decline in expenditures at the time of retirement is matched by an equally dramatic rise in time spent on home production. The innovation of our paper is that we empirically disentangle changes in actual consumption from changes in expenditures. To do so, we use a novel data set which collects detailed food diaries for a large cross-section of U.S. households. We show that despite the decline in food expenditures, neither the quantity nor the quality of food intake deteriorates with retirement status. Using our measures of actual consumption, we directly test the Permanent Income Hypothesis and find that the marginal value of wealth remains constant as individuals transition into retirement. We show that the increase in time spent on home production is quantitatively large enough to explain the decline in expenditure, holding actual consumption constant. Lastly, we show that unemployed households experience a decline in consumption commensurate to the impact of job displacement on permanent income. Taken together, the results on retirement and unemployment highlight how direct measures of consumption distinguish between anticipated and unanticipated shocks to income, while using expenditure alone obscures this difference and leads to false rejections of the PIH.

/pdf/consumption-vs-expenditure-ootb5ekytp.pdf

Consumption vs. Expenditure

From the Abstract: Using weekly, anonymized administrative payroll data from the largest U S payroll processing company, we measure the deterioration of the U S labor market during the first two months of the global COVID-19 [coronavirus disease 2019] pandemic We find that U S private-sector employment contracted by about 22 percent between mid-February and mid-April Businesses suspending operations--perhaps temporarily--account for a significant share of employment losses, particularly among smaller businesses Hours worked for continuing workers fell by 4 5 percent We highlight large differences in employment declines by industry, business size, state of residence, and demographic group Workers in the bottom quintile of the wage distribution experienced a 35 percent employment decline while those in the top quintile experienced only a 9 percent decline Large differences across the wage distribution persist even after conditioning on worker age, business industry, business size, and worker location As a result, average base wages increased by over 5 percent, though this increase arose entirely through a composition effect Overall, we document that the speed and magnitude of labor market deterioration during the early parts of the pandemic were unprecedented in the postwar period, particularly for the bottom of the earnings distribution COVID-19 (Disease);Epidemics;Public health;Social Distancing;Labor market

/pdf/the-u-s-labor-market-during-the-beginning-of-the-pandemic-5b1vaypn2r.pdf

Erik Hurst

Papers

The wealth dynamics of American families, 1984-94

Deconstructing Life Cycle Expenditure

Are Household Surveys Like Tax Forms: Evidence from Income Underreporting of the Self-Employed

Consumption vs. Expenditure

The U.S. Labor Market during the Beginning of the Pandemic Recession