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.

Who Governs Educational Change? The Paradoxes of State Power and the Pursuit of Educational Reform in Post-Neoliberal Ecuador (2007-2015)

This study identifies and compares competing policy stories of key actors involved in the Ecuadorian education reform under President Rafael Correa from 2007-2015. By revealing these competing policy stories the study generates insights into the political and technical aspects of education reform in a context where state capacity has been eroded by decades of neoliberal policies. Since the elections in 2007, President Correa has focused much of his political effort and capital on reconstituting the state’s authority and capacity to not only formulate but also implement public policies. The concentration of power combined with a capacity building agenda allowed the Correa government to advance an ambitious comprehensive education reform with substantive results in equity and quality. At the same time the concentration of power has undermined a more inclusive and participatory approach which are essential for deepening and sustaining the reform. This study underscores both the limits and importance of state control over education; the inevitable conflicts and complexities associated with education reforms that focus on quality; and the limits and importance of participation in reform. Finally, it examines the analytical benefits of understanding governance, participation and quality as socially constructed concepts that are tied to normative and ideological interests.