In this paper, we develop a tractable model of the labor market where workers search for jobs both while unemployed and while on the job. Search is directed in the sense that each worker chooses to search for the offer that provides the optimal tradeoff between the probability of obtaining the offer and the increase in the value relative to the worker’s current employment. There are both aggreg...

Labor productivity (LP) in the United States has gone from being procyclical to acyclical since the mid1980s. Using industry-level data, this paper first shows that total factor productivity (TFP), which is LP net of capital deepening, has also become much less correlated with output as well as inputs over the same period. Moreover, the bulk of the decline in aggregate TFP’s cyclicality is attr...

We incorporate managerial e¤orts inside …rms in a standard monopolistic competition model a la Krugman(1980) with heterogenous …rms. The manager works to increase probability of productivity improvement for the …rm. Due to unobservable managerial e¤ort and limited liability, the optimal managerial compensation scheme links the market performance of the …rm to managerial incentives. Managers in ...

I evaluate two competing theories for microfoundations of aggregate fluctuations. The network hypothesis suggests industry-level shocks propagate across the inputoutput (IO) network of the economy, resulting in aggregate fluctuations. The granular hypothesis suggests idiosyncratic shocks to very large firms result in aggregate fluctuations. My main contribution is to connect the two aggregate f...

Asset prices aggregate information about current and future productivity. More information allows firms to make better investment decisions, potentially increasing social welfare. In this paper, I quantify the social value of the information transmitted by the financial system to firms in a real business cycle framework, in an environment with common productivity shocks and temporary, idiosyncr...

We consider a general equilibrium model with a production externality (e.g. pollution), where the regulator does not observe firm productivity shocks. We examine quantity (permit) regulation and price (tax) regulation. The quantity of permits issued by the regulator are independent of the productivity shock, since shocks are unobserved. Price regulation implies use of the regulated input is an ...

This paper shows how agricultural productivity shocks can generate large industrial output fluctuations in poor countries, using a static general-equilibrium model with Stone-Geary preferences. A negative shock to agricultural productivity increases food prices, which affects manufacturing output through two channels: (1) meeting subsistence requirements in the face of rising food prices causes...

I use the neoclassical growth model to identify the effects of technology shocks on the US business cycle. The model includes two sources of technology shocks: neutral, which affect the production of all goods homogeneously, and investment-specific. Investmentspecific shocks are the unique source of the secular trend in the real price of investment goods, while both shocks are the only factors ...

Recently there has been renewed interest in assessing economic models in the context of specific, empirically identified economic shocks. Typically, these shocks are identified one-at-a-time, ignoring potential correlations across shocks, or are identified in the context of a structural vector autoregression (SVAR) using zero restrictions only loosely tied to economic theory. In this paper, we ...