Department of Economics
Uris Hall, Ithaca, NY 14853
Information about this author at RePEc
NBER Working Papers and Publications
|March 2018||Short-Run Pain, Long-Run Gain? Recessions and Technological Transformation.|
with Alexandr Kopytov, Nikolai Roussanov: w24373
Recent empirical evidence suggests that job polarization associated with skill-biased technological change accelerated during the Great Recession. We use a standard neoclassical growth framework to analyze how business cycle fluctuations interact with the long-run transition towards a skill-intensive technology. In the model, since adopting the new technology disrupts production, firms prefer to do so in recessions, when profits are low. Similarly, workers also tend to learn new skills during downturns. As a result, recessions are deeper during periods of technological transition, but they also speed up adoption of the new technology. We document evidence for these mechanisms in the data. Our calibrated model is able to match both the long-run downward trend in routine employment and the d...
|March 2014||Uncertainty Traps|
with Pablo Fajgelbaum, Edouard Schaal: w19973
We develop a theory of endogenous uncertainty and business cycles in which short-lived shocks can generate long-lasting recessions. In the model, higher uncertainty about fundamentals discourages investment. Since agents learn from the actions of others, information flows slowly in times of low activity and uncertainty remains high, further discouraging investment. The economy displays uncertainty traps: self-reinforcing episodes of high uncertainty and low activity. While the economy recovers quickly after small shocks, large temporary shocks may have long-lasting effects on the level of activity. The economy is subject to an information externality but uncertainty traps may remain in the efficient allocation. Embedding the mechanism in a standard business cycle framework, we find that en...
Published: Pablo D. Fajgelbaum & Edouard Schaal & Mathieu Taschereau-Dumouchel, 2017. "Uncertainty Traps*," The Quarterly Journal of Economics, vol 132(4), pages 1641-1692. citation courtesy of