Sargent Reading Group Notes

This paper considers the relation between of firm size heterogeneity and income dispersion. Using two large panel data sets, they document a number of empirical facts about the link between these forms of heterogeneity, then build a model combining non-homothetic preferences for consumers and a Metliz’ style production environment that can match the facts. Data Kilts Nielsen consumer panel and retail scanner data.. weekly upc code level data from households and firms contains prices and quantities also demographic info about households: discrete income binning, location Metadata about stores: brands they sell, location Empirical finding Main empirical finding is that wealthier households spend a higher share of consumption expenditure on goods from large firms.

The authors of this paper use confidential Irish data to document 4 novel facts about the lifecycle of exporting firms and then combine two existing modeling pieces to builds a partial equilibrium model that can reconcile the reported facts. Data The authors use two confidential micro data sets from Ireland: The Irish census of industrial production Irish custom records They are able to link the datasets to build a panel dataset at the firm-product-destination market level.

This paper uses Compustat data to document that the aggregate capital share of income and average capital share of income have diverged over the last 20 years. Specifically, the average capital share has fallen while the aggregate share has risen. They then write down a model that uses changes in firm level volatility of productivity to generate similar dynamics in general equilibrium. The model is interesting in its own right. It features a 2 sided limited commitment contracting problem.

The authors of this paper use firm level data on Portuguese manufacturing firms and documents two new novel facts about the joint evolution of firm performance and prices: Within product categories, firms with longer tenure in export markets tend to export larger quantities at similar prices Older or more experienced exporters tend to import more expensive inputs The authors then write down a model that can match these facts

The goal of this paper is to test the degree of risk sharing across regions and industries in the US. The rough outline is to write down a simple model they use to motivate an empirical specification, then test if that specification holds in the data. Model There are H households that each live in one of R regions and work within one of I industries. Each period, households receive an endowment of the consumption good and are able to trade in complete state contingent markets.

The basic idea in this paper is to separate the standard rationality requirements embedded in the rational expectations hypothesis into internal and external components. Internal rationality means that the agents make fully optimal decisions given some well-defined subjective beliefs about payoff relevant variables. External rationality requires that the probability distribution generated by agent subjective beliefs matches the true distribution of underlying variables. This paper will maintain the assumption of internal rationality, but not impose external rationality.

The basic idea in this paper is to separate the standard rationality requirements embedded in the rational expectations hypothesis into internal and external components. Internal rationality means that the agents make fully optimal decisions given some well-defined subjective beliefs about payoff relevant variables. External rationality requires that the probability distribution generated by agent subjective beliefs matches the true distribution of underlying variables. This paper will maintain the assumption of internal rationality, but not impose external rationality.

Builds on the internal rationality framework from last week to build a model of asset pricing that can explain 5 facts that have puzzled the literature at one time or another. Facts Standard deviation of price dividend ratio is very high (about 1/2 the mean of the PD ratio) First-order quarterly autocorrelation of PD ratio is vary high Standard deviation of stock returns is almost 4 times as large as standard deviation of dividend growth PD ratio is good long run predictor of stock returns Equity premium puzzle: return on risky stocks is too high relative to bonds for standard models Model There is a unit mass of infinitely lived investors, endowed with one unit of a stock that can be traded in a competitive market and that pays a per period dividend D in units of a perishable consumption good.

This paper develops a model with menu costs for adjusting prices and imperfect information about idiosyncratic productivity shocks. They conduct monetary policy experiments and conclude that the distribution of firm level uncertainty is important for the propagation of monetary shocks. Model In this model time is continuous. There is a representative consumer, a continuum of monopolistically competitive firms, and a monetary authority. In the baseline model, the monetary authority keeps the money supply fixed at its initial level.

This paper presents and analyzes a stylized model of poverty traps in developing economies. Baseline model In the baseline model there are a finite number of agents. Agent’s are characterized by a constant level of innate ability α and an evolving stock of capital k. Each period, agents choose which of two DRS production technologies they wish to operate in that period. Switching technologies is costless. Both technologies have innate ability multiplied by physical capital raised to a power less than one.