Demographic Origins of the Startup Deficit
Fatih Karahan, Federal Reserve Bank of New York
Benjamin Pugsley, University of Notre Dame
Ayşegül Şahin, University of Texas at Austin and NBER
John C. Haltiwanger, University of Maryland and NBER

Karahan, Pugsley, and Sahin study the causes of the declining startup rate over the past three decades. The stability of firms' lifecycle dynamics throughout this period along with the widespread nature of the declining startup rate place strong restrictions on potential explanations. They show that declines in the growth rate of the labor force explain an important share of the startup rate decline while leaving incumbent dynamics unaffected in a Hopenhayn-style firm dynamics model. Moreover, using cross-sectional demographic variation the researchers estimate a quantitatively and statistically significant labor supply growth elasticity of the startup rate, which is robust to alternative specifications. The findings suggest that the decline in the growth rate of the working age population through its general equilibrium effects on firm dynamics are an important driver of the decline in firm entry.


In addition to the conference paper, the research was distributed as NBER Working Paper w25874, which may be a more recent version.

Monetary Policy with Heterogeneous Agents: Insights from TANK Models
Davide Debortoli, Universitat Pompeu Fabra
Jordi Galí, CREI and NBER
Giovanni L. Violante, Princeton University and NBER

Heterogeneous agents New Keynesian (HANK) models are shown to differ from their representative agent (RANK) counterparts along two dimensions: differences in average consumption at any point in time between constrained and unconstrained households, and consumption heterogeneity within the subset of unconstrained households. These two factors are captured in a simple way by two "wedges" that appear in an aggregate Euler equation, and whose behavior can be traced in response to any aggregate shock, allowing Debortoli and Galí to assess their quantitative significance. A simple two-agent New Keynesian (TANK) model abstracts completely from heterogeneity within unconstrained agents, but is shown to capture reasonably well the implications of a baseline HANK model regarding the effects of aggregate shocks on aggregate variables. The researchers discuss the implications of our findings for the design of optimal monetary policy.

The End of the American Dream? Inequality and Segregation in US Cities
Alessandra Fogli, Federal Reserve Bank of Minneapolis
Veronica Guerrieri, University of Chicago and NBER
Richard Rogerson, Princeton University and NBER

Since the '80s, the U.S. has experienced not only a steady increase in income inequality, but also a contemporaneous increase in residential segregation by income. Using U.S. Census data, Fogli and Guerrieri document a positive correlation between income inequality and residential segregation between 1980 and 2010, both across time and across space, at the MSA level. They then develop a general equilibrium overlapping generations model where parents choose the neighborhood where to raise their children and invest in their children's human capital. In the model, segregation and inequality amplify each other because of a local spillover that affects the returns to education. The researchers calibrate the model to 1980 using Census data and the micro estimates of the local spillover effect derived by Chetty and Hendren (2018b). Fogli and Guerrieri then hit the economy with a skill premium shock and show that 20% of the increase in inequality in the short run, and 29% in the long run can be attributed to the feedback effect of the local spillover.


In addition to the conference paper, the research was distributed as NBER Working Paper w26143, which may be a more recent version.

Sweat Equity in U.S. Private Business
Anmol Bhandari, University of Minnesota and NBER
Ellen McGrattan, University of Minnesota and NBER
Robert E. Hall, Stanford University and NBER

Bhandari and McGrattan first provide evidence that existing measures of business incomes and valuations based on widely-used surveys such as the Survey of Consumer Finances are mismeasured. They then develop a theory disciplined by U.S. national accounts and business census data to measure net incomes and private business sweat equity -- which is the value of time to build customer bases, client lists, and other intangible assets. The researchers estimate an aggregate sweat equity value of 0.65 times GDP, with little cross-sectional dispersion in valuations when compared to business net incomes and large cross-sectional dispersion in rates of return. The estimate of sweat equity is close to the estimate of marketable fixed assets used in production by private businesses, implying a high ratio of intangible to total assets. The researchers use the model to evaluate the impact of greater tax compliance of private businesses and lower tax rates on the net income of both privately held and publicly traded businesses. They find larger sectoral and aggregate effects from the tax policy experiments relative to studies that abstract from private business and, in particular, the accumulation of sweat capital. Finally, Bhandari and McGrattan show that their results are robust to including non-pecuniary benefits of business ownership.

Kaldor and Piketty's Facts: The Rise of Monopoly Power in the United States
Gauti B. Eggertsson, Brown University and NBER
Jacob Robbins, Brown University
Ella Wold, Brown University
Loukas Karabarbounis, University of Minnesota and NBER

The macroeconomic data of the last thirty years has overturned at least two of Kaldor's famous stylized growth facts: constant interest rates, and a constant labor share. At the same time, the research of Piketty and others has introduced several new and surprising facts: an increase in the financial wealth-to-output ratio in the U.S., an increase in measured Tobin's Q, and a divergence between the marginal and the average return on capital. Eggertsson, Robbins, and Wold argue that these trends can be explained by an increase in market power and pure profits in the U.S. economy, i.e., the emergence of a non-zero-rent economy, along with forces that have led to a persistent long term decline in real interest rates. The researchers make three parsimonious modifications to the standard neoclassical model to explain these trends. Using recent estimates of the increase in markups and the decrease in real interest rates, they show that their model can quantitatively match these new stylized macroeconomic facts.

Banking, Trade, and the Making of a Dominant Currency
Gita Gopinath, Harvard University
Jeremy C. Stein, Harvard University and NBER
Fabrizio Perri, Federal Reserve Bank of Minneapolis

Gopinath and Stein explore the interplay between trade invoicing patterns and the pricing of safe assets in different currencies. Their theory highlights the following points: 1) a currency's role as a unit of account for invoicing decisions is complementary to its role as a safe store of value, 2) this complementarity can lead to the emergence of a single dominant currency in trade invoicing and global banking, even when multiple large candidate countries share similar economic fundamentals, 3) firms in emerging-market countries endogenously take on currency mismatches by borrowing in the dominant currency, 4) the expected return on dominant currency safe assets is lower than that on similarly safe assets denominated in other currencies, thereby bestowing an "exorbitant privilege" on the dominant currency. The theory thus provides a unified explanation for why a dominant currency is so heavily used in both trade invoicing and in global finance.


In addition to the conference paper, the research was distributed as NBER Working Paper w24485, which may be a more recent version.


Below is a list of conference attendees.
Jushan Bai, Columbia University
Mark Bognanni, Federal Reserve Bank of Cleveland
Paolo Bonomolo, De Nederlandsche Bank
May Bunsupha, Harvard University
Damien Capelle, Princeton University
Carlos Carvalho, PUC-Rio
Julieta Caunedo, Cornell University
Yujiang River Chen, University of Cambridge
Taeyoung Doh, Federal Reserve Bank of Kansas City
Cynthia Doniger, Federal Reserve Board
Kevin Donovan, Yale University
Leland Farmer, University of Virginia
Alan Finkelstein Shapiro, Tufts University
Juan Angel García, European Central Bank
Valentina Gavazza, Stockholm University
Matthieu Gomez, Columbia University
Emilien Gouin-Bonenfant, Columbia University
Franz Hamann, Central Bank of Colombia
Cars Hommes, University of Amsterdam
Joao Issler, FGV
Yuto Iwasaki, Bank of Japan
Marios Karabarbounis, Federal Reserve Bank of Richmond
Ari Kutai, Bank of Israel
Vegard Larsen, Norges Bank
Eben Lazarus, Massachusetts Institute of Technology
Oksana Leukhina, Federal Reserve Bank of St. Louis
Jianyu Lu, Central Bank of Chile
Julian Ludwig, University of Texas
Claudia Macaluso, University of Illinois at Urbana-Champaign
Tomasz Makarewicz, University of Bamberg
Aytek Malkhozov, Federal Reserve Board
Sephorah J. Mangin, Australian National University
Christian Matthes, Indiana University
Felix Mauersberger, University of Bonn
Sara Moreira, Northwestern University
Kristoffer Nimark, Cornell University
Alessia Paccagnini, University College Dublin
Damjan Pfajfar, Federal Reserve Board
Alberto G. Rossi, Georgetown University
Filip Rozsypal, Danmarks Nationalbank
Elisa Rubbo, Princeton University
Francisco Ruge-Murcia, McGill University
Isabelle Salle, University of Amsterdam
Kathrin Schlafmann, Stockholm University
Gustavo A. Schwenkler, Santa Clara University
Roberto Steri, University of Luxembourg
Martin Stuermer, Federal Reserve Bank of Dallas
Andrea Tamoni, Rutgers Business School
Saskia ter Ellen, Norges Bank
Chung Tran, Australian National University
Antonella Tutino, Federal Reserve Bank of Dallas
Fabian Winkler, Federal Reserve Board
Erin L. Wolcott, Middlebury College
Shayan Zakipour-Saber, Bank of Ireland

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