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ZhenCui - dissertation new title pg.pdf (1.38 MB)

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Essays on Macroeconomics: Structural Analysis of Fiscal Policies and Jobless Recoveries

Cui, Zhen
http://rave.ohiolink.edu/etdc/view?acc_num=osu1408533926

Abstract Details

2014, Doctor of Philosophy, Ohio State University, Economics.
My research studies how fiscal policies affect an economy and uncovers the cause behind the "Jobless Recovery." The first essay "Consumption Response to Tax Cuts in Life-Cycle Economies" studies the aggregate consumption response to a tax cut in a life-cycle economy. I construct a general equilibrium model where households have a finite lifespan and smooth consumption using one asset. The asset is associated with a stochastic adjustment cost. The model replicates the lifetime mean net worth profile observed in the data. The implied aggregate marginal propensity to consume (MPC) out of the tax cut ranges from 14% to 43%. In contrast to the frictionless version, this model generates a substantial rise in aggregate consumption under the tax cut without needing a large aggregate MPC. The model also indicates the quantitative importance of how a tax cut is financed. The second essay "A Model of the Consumption Response to Government Expenditures" develops a structural model to examine the effect of an increase in government spending. The model has finitely-lived households who smooth consumption using two assets. The first asset is a low return free-to-adjust asset lent by the households to the government; the second asset is a high return costly-to-adjust asset used as capital by a representative firm. Working-age households supply a fixed amount of labor to the firm. The government raises taxes to finance its spending and maintains a balanced budget. Prices are perfectly flexible and adjust to clear all markets. The model generates an interesting result: the rise in government spending crowds out investment and drives down total output. Therefore, this paper shows that a rise in government spending can lead to a recession in a general equilibrium model with capital, flexible prices, and a fixed labor supply. The result is reversed if I endogenize labor supply by allowing households to choose their hours of work. Specifically, consumption drops substantially, causing labor supply to rise on impact. Since capital is predetermined, total output increases. The third essay "Jobless Recoveries and Sectoral Skill-Biased Structural Change" studies the slow job market recovery in the post-1990 U.S. I document four stylized facts. (1) The U.S. job market has taken significantly longer to recover after each post-1990 recession. (2) The recovery of goods sector employment was slow after each post-1990 recession. (3) The educational attainment of service sector workers has surpassed that of goods sector workers since 1990. (4) The skill premium of workers with college-plus education has increased faster in the service sector than in the goods sector. I argue that Facts (3) and (4) indicate a post-1990 skill-biased structural change (SBSC) in the service sector. The SBSC has prevented unemployed workers in the goods sector from relocating to the service sector, causing a sluggish job market recovery at the aggregate and goods sector level. I then develop a model where SBSC is integrated via a labor adjustment cost and a reallocation shock. The simulation results show that the model successfully accounts for Facts (1) and (2).
Pok-Sang Lam (Advisor)
123 p.
Economics
life-cycle consumption response; consumption and fiscal policy; jobless recoveries

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Citations

  • Cui, Z. (2014). Essays on Macroeconomics: Structural Analysis of Fiscal Policies and Jobless Recoveries [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1408533926

    APA Style (7th edition)

  • Cui, Zhen. Essays on Macroeconomics: Structural Analysis of Fiscal Policies and Jobless Recoveries. 2014. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1408533926.

    MLA Style (8th edition)

  • Cui, Zhen. "Essays on Macroeconomics: Structural Analysis of Fiscal Policies and Jobless Recoveries." Doctoral dissertation, Ohio State University, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=osu1408533926

    Chicago Manual of Style (17th edition)

osu1408533926
422
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