Central bank research hub - Papers by Per Krusell
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Research hub papers by author Per KrusellenAsset Trading and Valuation with Uncertain Exposure
http://www.richmondfed.org/publications/research/working_papers/2014/pdf/wp14-05.pdf
Richmond Fed Working Papers by Juan Carlos Hatchondo , Per Krusell and Martin SchneiderAsset Trading and Valuation with Uncertain Exposure2014-03-05T17:34:00ZThis paper considers an asset market where investors have private information not only about asset payoffs, but also about their own exposure to an aggregate risk factor. In equilibrium, rational investors disagree about asset payoffs: Those with higher exposure to the risk factor are (endogenously) more optimistic about claims on the risk factor. Thus, information asymmetry limits risk sharing and trading volumes. Moreover, uncertainty about exposure amplifies the effect of aggregate exposure on asset prices, and can thereby help explain the excess volatility of prices and the predictability of excess returns.Asset Trading and Valuation with Uncertain ExposureAbstracthttp://richmondfed.org/publications/research/working_papers/2014/wp_14-05.cfmFull texthttp://www.richmondfed.org/publications/research/working_papers/2014/pdf/wp14-05.pdfMartin SchneiderJuan Carlos HatchondoPer KrusellJuan Carlos Hatchondo , Per Krusell and Martin Schneider2014-03Federal Reserve Bank of Richmond Working PapersTechnology-Policy Interaction in Frictional Labor Markets
http://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-10.pdf
Richmond Fed Working Papers by Andreas Hornstein, Per Krusell, Giovanni L. ViolanteTechnology-Policy Interaction in Frictional Labor Markets2006-11-17T07:12:00ZDoes capital-embodied technological change play an important role in shaping labor market outcomes? To address this question, we develop a model with vintage capital and search-matching frictions where irreversible investment in new vintages of capital creates heterogeneity in productivity among firms, matched as well as vacant. We demonstrate that capital-embodied technological change reduces labor demand and raises equilibrium unemployment and unemployment durations. In addition, the presence of labor market regulation¿we analyze unemployment benefits, payroll and income taxes, and firing costs¿exacerbates these effects. Thus, the model is qualitatively consistent with some key features of the European labor market experience, relative to that of the United States: it features a sharper rise in unemployment and a sharper fall in the vacancy rate and the labor share. A calibrated version of our model suggests that this technology-policy interaction could explain a sizeable fraction of the observed differences between the United States and Europe.Technology-Policy Interaction in Frictional Labor MarketsAbstracthttp://richmondfed.org/publications/research/working_papers/2006/wp_06-10.cfmFull texthttp://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-10.pdfAndreas HornsteinPer KrusellGiovanni L. ViolanteAndreas Hornstein, Per Krusell, Giovanni L. Violante2006-11Federal Reserve Bank of Richmond Working PapersThe Political Economy of Labor Subsidies
http://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-9.pdf
Richmond Fed Working Papers by Marina Azzimonti, Eva de Francisco, Per KrusellThe Political Economy of Labor Subsidies2006-10-12T08:36:59ZWe explore a political economy model of labor subsidies, extending Meltzer and Richard's median voter model to a dynamic setting. We explore only one source of heterogeneity: initial wealth. As a consequence, given an operative wealth effect, poorer agents work harder, and if the agent with median wealth is poorer than average, a politico-economic equilibrium will feature a subsidy to labor. The dynamic model does not have capital, but it has perfect markets for borrowing and lending. Because tax rates influence interest rates, another channel for redistribution appears, since a decrease in current interest rates favors agents with a negative (below-average) asset position.The Political Economy of Labor SubsidiesAbstracthttp://richmondfed.org/publications/research/working_papers/2006/wp_06-9.cfmFull texthttp://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-9.pdfEva de FranciscoPer KrusellMarina AzzimontiMarina Azzimonti, Eva de Francisco, Per Krusell2006-10Federal Reserve Bank of Richmond Working PapersFrictional Wage Dispersion in Search Models: A Quantitative Assessment
http://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-7.pdf
Richmond Fed Working Papers by Andreas Hornstein, Per Krusell, Giovanni L. ViolanteFrictional Wage Dispersion in Search Models: A Quantitative Assessment2006-09-25T17:34:59ZStandard search and matching models of equilibrium unemployment, once properly calibrated, can generate only a small amount of frictional wage dispersion, i.e., wage differentials among ex-ante similar workers induced purely by search frictions. We derive this result for a specific measure of wage dispersion|the ratio between the average wage and the lowest (reservation) wage paid. We show that in a large class of search and matching models this statistic (the \mean-min ratio") can be obtained in closed form as a function of observable variables (i.e., interest rate, value of leisure, and statistics of labor market turnover). Looking at various independent data sources suggests that, empirically, residual wage dispersion (i.e., inequality among observationally similar workers) exceeds the model's prediction by a factor of 20. We discuss three extensions of the model (risk aversion, volatile wages during employment, and on-the-job search) and find that, in their simplest version, they can improve its performance, but only modestly. We conclude that either frictions account for a tiny fraction of residual wage dispersion, or the standard model needs to be augmented to confront the data.Frictional Wage Dispersion in Search Models: A Quantitative AssessmentAbstracthttp://richmondfed.org/publications/research/working_papers/2006/wp_06-7.cfmFull texthttp://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-7.pdfAndreas HornsteinPer KrusellGiovanni L. ViolanteAndreas Hornstein, Per Krusell, Giovanni L. Violante2006-09Federal Reserve Bank of Richmond Working PapersTechnical Appendix for "Frictional Wage Dispersion in Search Models: A Quantitative Assessment"
http://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-8.pdf
Richmond Fed Working Papers by Andreas Hornstein, Per Krusell, Giovanni L. ViolanteTechnical Appendix for "Frictional Wage Dispersion in Search Models: A Quantitative Assessment"2006-09-25T17:34:59ZIn this Technical Appendix to Hornstein, Krusell, and Violante (2006) (HKV, 2006, hereafter) we provide a detailed characterization of the search model with (1) wage shocks during employment and (2) on-the-job search outlined in Sections 6 and 7 of that paper, and we derive all of the results that are only stated in HKV (2006). In particular, we derive the expressions for our preferred measure of frictional wage inequality: the ratio of average wages to the reservation wage, or, the `mean-min' wage ratio.Technical Appendix for "Frictional Wage Dispersion in Search Models: A Quantitative Assessment"Abstracthttp://richmondfed.org/publications/research/working_papers/2006/wp_06-8.cfmFull texthttp://richmondfed.org/publications/research/working_papers/2006/pdf/wp06-8.pdfAndreas HornsteinPer KrusellGiovanni L. ViolanteAndreas Hornstein, Per Krusell, Giovanni L. Violante2006-09Federal Reserve Bank of Richmond Working PapersThe Replacement Problem in Frictional Economies: A Near-Equivalence Result
http://richmondfed.org/publications/research/working_papers/2005/pdf/wp05-1.pdf
Richmond Fed Working Papers by Andreas Hornstein, Per Krusell, Giovanni L. ViolanteThe Replacement Problem in Frictional Economies: A Near-Equivalence Result2005-04-27T12:33:59ZWe examine how technological change affects wage inequality and unemployment in a calibrated model of matching frictions in the labor market. We distinguish between two polar cases studied in the literature: a "creative destruction" economy where new machines enter chiefly through new matches and an "upgrading" economy where machines in existing matches are replaced by new machines. Our main results are: (i) these two economies produce very similar quantitative outcomes, and (ii) the total amount of wage inequality generated by frictions is very small. We explain these findings in light of the fact that, in the model calibrated to the U.S. economy, both unemployment and vacancy durations are very short, i.e., the matching frictions are quantitatively minor. Hence, the equilibrium allocations of the model are remarkably close to those of a frictionless version of our economy where firms are indifferent between upgrading and creative destruction, and where every worker is paid the same market-clearing wage. These results are robust to the inclusion of machine-specific or match-specific heterogeneity into the benchmark model.The Replacement Problem in Frictional Economies: A Near-Equivalence ResultAbstracthttp://richmondfed.org/publications/research/working_papers/2005/wp_05-1.cfmFull texthttp://richmondfed.org/publications/research/working_papers/2005/pdf/wp05-1.pdfAndreas HornsteinPer KrusellGiovanni L. ViolanteAndreas Hornstein, Per Krusell, Giovanni L. Violante2005-04Federal Reserve Bank of Richmond Working PapersThe Effects of Technical Change on Labor Market Inequalities
http://richmondfed.org/publications/research/working_papers/2004/pdf/wp04-8.pdf
Richmond Fed Working Papers by Andreas Hornstein, Per Krusell, Giovanni L. ViolanteThe Effects of Technical Change on Labor Market Inequalities2004-12-29T17:36:59ZIn this chapter we inspect economic mechanisms through which technological progress shapes the degree of inequality among workers in the labor market. A key focus is on the rise of U.S. wage inequality over the past 30 years. However, we also pay attention to how Europe did not experience changes in wage inequality but instead saw a sharp increase in unemployment and an increased labor share of income, variables that remained stable in the U.S. We hypothesize that these changes in labor market inequalities can be accounted for by the wave of capital-embodied technological change, which we also document. We propose a variety of mechanisms based on how technology increases the returns to education, ability, experience, and "luck" in the labor market. We also discuss how the wage distribution may have been indirectly influenced by technical change through changes in certain aspects of the organization of work, such as the hierarchical structure of firms, the extent of unionization, and the degree of centralization of bargaining. To account for the U.S.-Europe differences, we use a theory based on institutional differences between the United States and Europe, along with a common acceleration of technical change. Finally, we briefly comment on the implications of labor market inequalities for welfare and for economic policy.The Effects of Technical Change on Labor Market InequalitiesAbstracthttp://richmondfed.org/publications/research/working_papers/2004/wp_04-8.cfmFull texthttp://richmondfed.org/publications/research/working_papers/2004/pdf/wp04-8.pdfAndreas HornsteinPer KrusellGiovanni L. ViolanteAndreas Hornstein, Per Krusell, Giovanni L. Violante2004-12Federal Reserve Bank of Richmond Working Papers