Essays on Macroeconomic Trends and Cycles

This dissertation describes two studies on macroeconomic trends and cycles. The first chapter studies the impact of Information Technology (IT) on the U.S. labor market. Over the past 30 years, employment and income shares of routine-intensive occupations have declined significantly relative to nonroutine occupations, and the overall U.S. labor income share has declined relative to capital. Furthermore, the decline of routine employment has been largely concentrated during recessions and ensuing recoveries. I build a model of unbalanced growth to assess the role of computerization and IT in driving these labor market trends and cycles. I augment a neoclassical growth model with exogenous IT progress as a form of Routine-Biased Technological Change (RBTC). I show analytically that RBTC causes the overall labor income share to follow a U-shaped time path, as the monotonic decline of routine labor share is increasingly offset by the monotonic rise of nonroutine labor share and the elasticity of substitution between the overall labor and capital declines under IT progress. Quantitatively, the model explains nearly all the divergence between routine and nonroutine labor in the period 1986-2014, as well as the mild decline of the overall labor share between 1986 and the early 2000s. However, the model with IT progress alone cannot explain the accelerated decline of labor income share after the early 2000s, suggesting that other factors, such as globalization, may have played a larger role in this period. Lastly, when nonconvex labor adjustment costs are present, the model generates a stepwise decline in routine labor hours, qualitatively consistent with the data. The timing of these trend adjustments can be significantly affected by aggregate productivity shocks and concentrated in recessions. The second chapter studies the implications of loss aversion on the business cycle dynamics of aggregate consumption and labor hours. Loss aversion refers to the fact that people are distinctively more sensitive to losses than to gains. Loss averse agents are very risk averse around the reference point and exhibit asymmetric responses to positive and negative income shocks. In an otherwise standard Real Business Cycle (RBC) model, I study loss aversion in both consumption alone and consumption-and-leisure together. My results indicate that how loss aversion affects business cycle dynamics depends critically on the nature of the reference point. If, for example, the reference point is status quo, loss aversion dramatically lowers the effective inter-temporal rate of substitution and induces excessive consumption smoothing. In contrast, if the reference point is fixed at a constant level, loss aversion generates a flat region in the decision rules and asymmetric impulse responses to technology shocks. Under a reasonable parametrization, loss aversion has the potential to generate asymmetric business cycles with deeper and more prolonged recessions.

Connecting the dots: Examining the role of parental beliefs and preschoolers’ affect and engagement in predicting parent-child number exploration during a meaningful math experience

The current study examined the frequency and quality of how 3- to 4-year-old children and their parents explore the relations between symbolic and non-symbolic quantities in the context of a playful math experience, as well as the role of both parent and child factors in this exploration. Preschool children’s numerical knowledge was assessed while parents completed a survey about the number-related experiences they share with their children at home, and their math-related beliefs. Parent-child dyads were then videotaped playing a modified version of the card game War. Results suggest that parents and children explored quantity explicitly on only half of the cards and card pairs played, and dyads of young children and those with lower number knowledge tended to be most explicit in their quantity exploration. Dyads with older children, on the other hand, often completed their turns without discussing the numbers at all, likely because they were knowledgeable enough about numbers that they could move through the game with ease. However, when dyads did explore the quantities explicitly, they focused on identifying numbers symbolically, used non-symbolic card information interchangeably with symbolic information to make the quantity comparison judgments, and in some instances, emphasized the connection between the symbolic and non-symbolic number representations on the cards. Parents reported that math experiences such as card game play and quantity comparison occurred relatively infrequently at home compared to activities geared towards more foundational practice of number, such as counting out loud and naming numbers. However, parental beliefs were important in predicting both the frequency of at-home math engagement as well as the quality of these experiences. In particular, parents’ specific beliefs about their children’s abilities and interests were associated with the frequency of home math activities, while parents’ math-related ability beliefs and values along with children’s engagement in the card game were associated with the quality of dyads’ number exploration during the card game. Taken together, these findings suggest that card games can be an engaging context for parent-preschooler exploration of numbers in multiple representations, and suggests that parents’ beliefs and children’s level of engagement are important predictors of this exploration.