Many business cycle models use a flat short-run Phillips curve, due to time-dependent pricing and strategic complementarities, to explain fluctuations in real output. But, in doing so, these models predict unrealistically high persistence and stability of US inflation in recent decades. We...

A number of economists find that growth and schooling are highly correlated across countries. A model is examined in which the ability to build on the human capital of one's elders plays an important role in linking growth to schooling. The model is calibrated to quantify the strength of the...

Using U.S. Consumer Expenditure Surveys, we estimate "quality Engel curves" for 66 durable goods based on the extent richer households pay more for each good. The same data show that the average price paid rises faster from 1980 to 1996 for goods with steeper quality Engel curves, as if...

The author examines the cyclical behavior of price/marginal cost margins for U.S. manufac turing after 1956. Short-run marginal cost is markedly procyclical. This is primarily due to procyclical overtime payments, incurred beca use employment is not perfectly flexible. In most industries, output...

The countercyclical pattern of inventory-sales ratios is a striking feature of inventory behavior. In a model where inventories are productive for sales, both the markup of price over marginal cost and expected changes in marginal cost are key determinants of that ratio. This paper argues that...

We construct a family model of labor supply that features adjustment along both the intensive and extensive margin. Intensive margin adjsutment is restricted to two values: full-time work and part-time work. Using simulated data from the steady state of the calibrated model, we examine whether...

Takahashi (2014) has uncovered coding errors in our paper, Chang and Kim (2007)-henceforth, CK. We acknowledge and are embarrassed by these mistakes. We are grateful to Takahashi for uncovering them. While the correction decreases the volatility of the labor market wedge, we find that the main...

We find that technology's effect on employment varies greatly across manufacturing industries. Some industries exhibit a temporary reduction in employment in response to a permanent increase in TFP, whereas many more industries exhibit an employment increase in response to a permanent TFP shock....

This paper suggests that skill accumulation through past work experience, or "learning-by-doing" (LBD), can provide an important propagation mechanism in a dynamic stochastic general-equilibrium model, as the current labor supply affects future productivity. Our econometric analysis uses a...