The Labor Market Effects of Technology Shocks

We analyze the labor market effects of neutral and investment-specific technology shocks along the intensive margin (hours worked) and the extensive margin (unemployment). We characterize the dynamic response of unemployment in terms of the job separation and the job finding rate. Labor market adjustments occur along the extensive margin in response to neutral shocks, along the intensive margin in response to investment specific shocks. The job separation rate accounts for a major portion of the impact response of unemployment. Neutral shocks prompt a contemporaneous increase in unemployment because of a sharp rise in the separation rate. This is prolonged by a persistent fall in the job finding rate. Investment specific shocks rise employment and hours worked. Neutral shocks explain a substantial portion of the volatility of unemployment and output; investment specific shocks mainly explain hours worked volatility. This suggests that neutral progress is consistent with Schumpeterian creative destruction, while investment-specific progress operates as in a neoclassical growth model.

Credit Constraints, Firms' Precautionary Investment, and the Business Cycle

This paper studies the macroeconomic implications of firms' precautionary investment behavior in response to the anticipation of future financing constraints. Firms increase their demand for liquid and safe investments in order to alleviate future borrowing constraints and decrease the probability of having to forego future profitable investment opportunities. This results in an increase in the share of short-term projects that produces a temporary increase in output, at the expense of lower long-run investment and future output. I show in a calibrated model that this behavior is at the source of a novel and powerful channel of shock transmission of productivity shocks that produces short-run dampening and long-run propagation. Furthermore, it can account for the observed business cycle patterns of the aggregate and firm-level composition of investment.

Economic growth with bubbles

We develop a stylized model of economic growth with bubbles. In this model, changes in investorsentiment lead to the appearance and collapse of macroeconomic bubbles or pyramid schemes.We show how these bubbles mitigate the effects of financial frictions. During bubbly episodes,unproductive investors demand bubbles while productive investors supply them. These transfersof resources improve the efficiency at which the economy operates, expanding consumption, thecapital stock and output. When bubbly episodes end, these transfers stop and consumption, thecapital stock and output contract. We characterize the stochastic equilibria of the model and arguethat they provide a natural way of introducing bubble shocks into business cycle models.

A global view of economic growth

This paper integrates in a unified and tractable framework some of the key insights of the field of international trade and economic growth. It examines a sequence of theoretical models that share a common description of technology and preferences but differ on their assumptions about trade frictions. By comparing the predictions of these models against each other, it is possible to identify a variety of channels through which trade affects the evolution of world income and its geographical distribution. By comparing the predictions of these models against the data, it is also possible to construct coherent explanations of income differences and long-run trends in economic growth.

Equities and inequality

Most US credit card holders revolve high-interest debt, often combined with substantial (i) asset accumulation by retirement, and (ii) low-rate liquid assets. Hyperbolic discounting can resolve only the former puzzle (Laibson et al., 2003). Bertaut and Haliassos (2002) proposed an 'accountant-shopper'framework for the latter. The current paper builds, solves, and simulates a fully-specified accountant-shopper model, to show that this framework canactually generate both types of co-existence, as well as target credit card utilization rates consistent with Gross and Souleles (2002). The benchmark model is compared to setups without self-control problems, with alternative mechanisms, and with impatient but fully rational shoppers.

Three essays in dynamic corporate finance

Summary Throughout my thesis, I elaborate on how real and financing frictions affect corporate decision making under uncertainty, and I explore how firms time their investment and financing decisions given such frictions. While the macroeconomics literature has focused on the impact of real frictions on investment decisions assuming all equity financed firms, the financial economics literature has mainly focused on the study of financing frictions. My thesis therefore assesses the join interaction of real and financing frictions in firms' dynamic investment and financing decisions. My work provides a rationale for the documented poor empirical performance of neoclassical investment models based on the joint effect of real and financing frictions on investment. A major observation relies in how the infrequency of corporate decisions may affect standard empirical tests. My thesis suggests that the book to market sorts commonly used in the empirical asset pricing literature have economic content, as they control for the lumpiness in firms' optimal investment policies. My work also elaborates on the effects of asymmetric information and strategic interaction on firms' investment and financing decisions. I study how firms time their decision to raise public equity when outside investors lack information about their future investment prospects. I derive areal-options model that predicts either cold or hot markets for new stock issues conditional on adverse selection, and I provide a rational approach to study jointly the market timing of corporate decisions and announcement effects in stock returns. My doctoral dissertation therefore contributes to our understanding of how under real and financing frictions may bias standard empirical tests, elaborates on how adverse selection may induce hot and cold markets in new issues' markets, and suggests how the underlying economic behaviour of firms may induce alternative patterns in stock prices.

Social capital, government expenditures, and growth

Countries with greater social capital have higher economic growth. We show that socialcapital is also highly positively correlated across countries with government expenditureon education. We develop an infinite-horizon model of public spending and endogenousstochastic growth that explains both facts through frictions in political agency whenvoters have imperfect information. In our model, the government provides servicesthat yield immediate utility, and investment that raises future productivity. Voters aremore likely to observe public services, so politicians have electoral incentives to underprovidepublic investment. Social capital increases voters' awareness of all governmentactivity. As a consequence, both politicians' incentives and their selection improve.In the dynamic equilibrium, both the amount and the efficiency of public investmentincrease, permanently raising the growth rate.

How important is the intensive margin of labor adjustment?

Using new quarterly data for hours worked in OECD countries, Ohanian and Raffo (2011) argue that in many OECD countries, particularly in Europe, hours per worker are quantitatively important as an intensive margin of labor adjustment, possibly because labor market frictions are higher than in the US. I argue that this conclusion is not supported by the data. Using the same data on hours worked, I find evidence that labor market frictions are higher in Europe than in the US, like Ohanian and Raffo, but also that these frictions seem to affect the intensive margin at least as much as the extensive margin of labor adjustment.

Le Tactilo : au coeur du débat sur la régulation des jeux de hasard et d'argent

Dans plusieurs pays (Suisse, France, États-Unis, Royaume-Uni), le cadre de régulation des jeux de hasard et d'argent est différencié selon la nature et la forme des jeux. Ainsi, le système suisse est régulé différemment suivant qu'il s'agit de loteries et de paris ou de casinos. Dans chacun de ces deux cas, un cadre juridique et de régulation diffèrent s'applique. Le système devient complexe lorsque certains jeux ou opérations ne peuvent pas être clairement attribués à un système de régulation ou à un autre ou lorsque des conflits de compétence interviennent entre les autorités de régulation. C'est le cas du Tactilo. Ce working paper présente de manière synthétique les différents aspects de la régulation de ce nouveau mode de distribution des jeux que sont les automates de type Tactilo et discute les développements légaux et les implications financières entourant ce débat. Ces éléments permettent de comprendre le débat actuel et de mieux comprendre les enjeux de la décision attendue du Tribunal fédéral dans ce dossier. Le Tactilo, un jeu de loterie ou un jeu de casino...?

The vanishing procyclicality of labor productivity

We document three changes in postwar US macroeconomic dynamics: (i) theprocyclicality of labor productivity has vanished, (ii) the relative volatility of employment has risen, and (iii) the relative (and absolute) volatility of the real wagehas risen. We propose an explanation for all three changes that is based on a common source: a decline in labor market frictions. We develop a simple model withlabor market frictions, variable effort, and endogenous wage rigidities to illustratethe mechanisms underlying our explanation. We show that the reduction in frictionsmay also have contributed to the observed decline in output volatility.

Bubbly collateral and economic activity

This paper develops a model of the bubbly economy and uses it to study the effects of bailoutpolicies. In the bubbly economy, weak enforcement institutions do not allow firms to pledge futurerevenues to their creditors. As a result, "fundamental" collateral is scarce and this impairs the intermediationprocess that transforms savings into capital. To overcome this shortage of "fundamental"collateral, the bubbly economy creates "bubbly" collateral. This additional collateral supports anintricate array of intra- and inter-generational transfers that allow savings to be transformed intocapital and bubbles. Swings in investor sentiment lead to fluctuations in the amount of bubblycollateral, giving rise to bubbly business cycles with very rich and complex dynamics.Bailout policies can affect these dynamics in a variety of ways. Expected bailouts provideadditional collateral and expand investment and the capital stock. Realized bailouts reduce thesupply of funds and contract investment and the capital stock. Thus, bailout policies tend to fosterinvestment and growth in normal times, but to depress investment and growth during crisis periods.We show how to design bailout policies that maximize various policy objectives.

Labor markets and monetary policy: A new-Keynesian model with unemployement

We construct a utility-based model of fluctuations, with nominal rigidities andunemployment, and draw its implications for the unemployment-inflation trade-off and for the conduct of monetary policy.We proceed in two steps. We first leave nominal rigidities aside. We show that,under a standard utility specification, productivity shocks have no effect onunemployment in the constrained efficient allocation. We then focus on theimplications of alternative real wage setting mechanisms for fluctuations in un-employment. We show the role of labor market frictions and real wage rigiditiesin determining the effects of productivity shocks on unemployment.We then introduce nominal rigidities in the form of staggered price setting byfirms. We derive the relation between inflation and unemployment and discusshow it is influenced by the presence of labor market frictions and real wagerigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and its dependence on labor market characteristics. We draw the implications for optimal monetary policy.

Enforcement problems and secondary markets

There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general conclusion is that weak enforcement institutions impair the workings of these markets, giving rise to various inefficiencies.But weak enforcement institutions also create incentives to develop secondary markets, in which the assets issued in primary markets are retraded. This paper shows that trading in secondary markets counteracts the effects of weak enforcement institutions and, in the absence of further frictions, restores efficiency.

Trade, migration and regional unemployment

We formulate a dynamic core-periphery model with frictions in the job matching process to study the interplay between trade costs, migration and regional unemploymentin the short- and long-run. We find that the spatial distribution of unemployment mirrors (inversely) the distribution of economic activities. Further, we highlight a contrast between the short-run and the long-run effects of trade-induced migration on regional unemployment. In particular, an inßow of immigrants from the periphery into the core reduces the unemployment gap in the short-run, but exacerbates unemployment disparities in the long-run.