The EconomicDynamics Newsletter
Volume 15, Issue 2, November 2014
A free electronic supplement to the Review of Economic Dynamics
distributed through the EconomicDynamics mailing list and
also available on the web at http://www.EconomicDynamics.org/
In this issue:
- The Research Agenda: Loukas Karabarbounis and Brent Neiman on the
Evolution of Factor Shares
- Review of Economic Dynamics: Letter from the Managing Editor
- Society for Economic Dynamics: Letter from the President
- Society for Economic Dynamics: 2015 Meeting Call for Papers
- Book Review: Miao's Economic Dynamics in Discrete Time
- Impressum
- Subscribing/Unsubscribing/Address change
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The Research Agenda: Loukas Karabarbounis and Brent Neiman on the
Evolution of Factor Shares
Loukas Karabarbounis is an Associate Professor of Economics at the
University of Chicago Booth School of Business. His research interests are
at the intersection of macroeconomics, labor economics, and international
macro. Brent Neiman is an Associate Professor of Economics at the
University of Chicago Booth School of Business. His research interests are
at the intersection of international finance, macroeconomics, and trade.
Ricardo (1817) argued that the principal problem of Political Economy is
to understand the laws governing the distribution of income between labor
and capital. Kaldor (1961) characterized the apparent stability of the
share of income accruing to labor as a key stylized fact. Despite some
scepticism (see, for example, Solow, 1958), the constancy of the labor
share has disciplined myriad models over the past half-century. The
requirement that the labor share be constant in theoretical models has
shaped many economists' intuitions regarding the aggregate production
function, economic growth, and inequality.
At odds with this background, the labor share of income has exhibited a
pervasive global decline since the early 1980s. In this research overview,
we summarize our work on the decline in the labor share. We first describe
global trends in the labor share and discuss some measurement issues.
Then, we summarize evidence that ties the labor share decline to the
decline in the price of investment goods and contrast this with
alternative explanations. Next, we present our recent work that studies
the implications of joint trends in depreciation and labor shares for the
structure of production, inequality, and macro dynamics. The conclusion
outlines some future avenues of research.
1. Labor Share Decline: The Facts
The labor share is the fraction of gross domestic product (GDP) paid as
compensation to labor for its services in the form wages, salaries in cash
or in kind, and various supplements such as employer contributions for
sickness, pensions, and insurance. "The Global Decline of the Labor Share"
(Karabarbounis and Neiman, 2014a) provides a broad and systematic account
of medium to long-term trends in the labor share of income. Few studies
have documented how labor shares have evolved after the 1980s, with some
notable exceptions being Blanchard (1997), Blanchard and Giavazzi (2003),
and Jones (2003). Our paper is a first attempt to quantify trends in the
labor share in a comprehensive sample of countries and industries in the
past 35 years, offering new stylized facts for macroeconomists.
We build a new dataset from national income and product accounts for many
countries and use it to document that the labor share has declined by more
than 5 percentage points globally since the early 1980s. The decline in
the labor share has been pervasive. It can be found in the United States
and in 7 out of the 8 largest economies of the world (the exception is the
United Kingdom for which our data starts in the late 1980s). The labor
share has declined in all Scandinavian countries, where labor unions have
been strong traditionally. The labor share decline is also observed in
many emerging markets that recently opened up to trade including China,
India, and Mexico.
The majority of industries also experienced declines in their labor
shares. In most countries, changes in the aggregate labor share
predominantly reflect changes in industry-level labor shares rather than
changes in the size of industries with different labor share levels. This
finding argues against otherwise plausible explanations for the decline of
the labor share that operate through sectoral shifts in economic activity.
Our new cross-country dataset (which we have made publicly available)
allows us to circumvent important measurement difficulties confronted by
most of the labor share literature. We measure labor shares within the
corporate sector, which largely excludes unincorporated enterprises and
sole proprietors whose income combines payments to both labor and capital.
As highlighted by Gollin (2002), this "mixed income" poses problems for
the consistent measurement of the labor share across countries and over
time. By contrast, international comparisons of corporate labor share
measures are cleaner.
Focusing on labor share measures within the corporate sector is desirable
for three additional reasons. First, the production function and
optimization problem in the government sector may be quite different from
that in the rest of the economy and likely varies across countries.
Second, labor share measures within the corporate sector are insensitive
to the measurement and economic interpretation of residential housing, a
controversial topic in studies of the economy-wide labor share. Most
structures in the corporate sector are offices, stores, and factories and
therefore should unambiguously be treated as assets that enter the
production function. Finally, the depreciation rate applied to the
aggregate capital stock is sensitive to the large fluctuations in
residential housing prices. As we discuss below, the dynamics of
depreciation are crucial for the interpretation of trends in factor shares
and capital accumulation.
2. Labor Share Decline: Explanations
The decline in the price of investment relative to the price of
consumption goods accelerated globally starting around 1980. This happened
roughly at the same time when the labor share started to decline. The
hypothesis we put forward in Karabarbounis and Neiman (2014a) is that the
decline in the labor share can be explained by the decline in the relative
price of investment goods. Decreases in the relative price of investment
goods, often attributed to advances in information technology and the
computer age, induced firms to shift away from labor and toward capital as
the cost of capital declined. If the elasticity of substitution between
capital and labor in the aggregate production function exceeds one, then
the shift of production toward capital is sufficiently strong to induce a
decline in the labor share.
Most prior estimates used time series variation within a country in factor
shares and factor prices to identify the elasticity of substitution in the
aggregate production function. By contrast, our estimates of this
elasticity are identified from cross-country and cross-industry variation
in trends in labor shares and rental rates of capital. Therefore, these
estimates are not influenced by the global component of the labor share
decline, the object we intend to explain. The rental rate of capital can
be influenced at high frequency by various factors such as short-run
changes in interest rates, adjustment costs, or financial frictions. These
factors, however, are unlikely to have a significant influence on long-run
trends in the rental rate, particularly compared to the relative price of
investment goods, which moves proportionately with the rental rate in the
long run.
Countries and industries in which the relative price of investment goods
declined the most experienced larger declines in their labor shares. This
finding implies that the elasticity of substitution between capital and
labor exceeds one. Given an estimated elasticity of substitution of 1.25,
we conclude that roughly half of the global decline in the labor share can
be attributed to the observed (more than 25 percent) global decline in the
relative price of investment goods.
This explanation fits well with other major macroeconomic developments
over the past decades. As Greenwood, Hercowitz, and Krusell (1997) argue,
technology-driven changes in the relative price of investment goods
constitute a major factor in economic growth. Krusell, Ohanian, Rios-Rull,
and Violante (2000) show that the increase in capital equipment is a key
force for understanding the increase in the skill premium. Shocks to the
relative efficiency of investment goods (as in Greenwood, Hercowitz, and
Huffman, 1988) are now considered a standard input into dynamic stochastic
general equilibrium models that generate cyclical fluctuations in economic
activity.
What about other factors potentially influencing the labor share? The
hypothesis that trade and globalization have affected the labor share is
theoretically appealing. The simplest story is that, following reductions
in global trade frictions, capital-abundant countries have shifted
production toward sectors that use capital more intensively in production.
These countries import from labor-abundant countries that have shifted
production toward sectors that use labor more intensively.
This Heckscher-Ohlin based explanation cannot be easily reconciled with
the available evidence. First, labor-abundant countries such as China,
India, and Mexico actually also experienced rapid declines in their labor
shares, not the increases that this theory would predict. Second, this
story attributes an important role for the between-industry component of
the labor share decline. However, our evidence shows that the
within-industry component is most important in developed economies. While
there are other mechanisms through which international trade could affect
the labor share (e.g. trade-induced declines in the relative price of
investment goods), more evidence is needed before concluding that
international trade plays an important role for the labor share decline.
What is the role of price markups and profit shares for the labor share
decline? In a world with monopoly power, income is split between
compensation to labor, rental payments to capital, and economic profits.
Since in many countries capital shares did not display significant
increases (reflecting the relative stability of investment rates),
increasing profits shares are important in understanding the labor share
decline. However, given that the estimated elasticity of substitution
remains relatively stable when taking into account changes in markups, the
decline in the relative price of investment still explains roughly half of
the labor share decline.
Countries in our sample have experienced diverse wage growth and
heterogeneous paths of economic development over the past decades. The
estimates of the elasticity of substitution we described above are based
on the first-order condition for capital, a condition that relates the
labor share to markups, capital-augmenting technology, and rental rates.
Therefore, the effect of the declining relative price of investment on the
labor share is compatible with any given cross-country variation in levels
or in growth of both wages and labor-augmenting technology, once we take
into account variations in markups, capital-augmenting technology, and
rental rates.
A plausible hypothesis is that countries experiencing larger declines in
the relative price of investment goods also experienced larger increases
in capital-augmenting technological change. An important result is that
such a case would never lead one to conclude that the elasticity of
substitution is below one when the true elasticity of substitution is
above one. The results in Karabarbounis and Neiman (2014a) do not exclude
the possibility that capital-augmenting technological progress is
important for the labor share decline. On empirical grounds we find
declines in the relative price of investment goods a more appealing
explanation than increases in capital-augmenting technology because the
former are observed whereas the latter are typically estimated as
residuals from first-order conditions. Nevertheless, with an elasticity of
substitution greater than one, a combination of observed declines in the
relative price of investment and (unobserved) increases in
capital-augmenting technology can explain the decline in the labor share.
In many developed economies both the fraction of the workforce with
college education and the college wage premium have increased during the
past decades. This resulted in an increase in the share of income accruing
to skilled labor relative to the share of income accruing to unskilled
labor. A reasonable view of the world is that changes in the skill
composition of the labor force interact both with the decline in the labor
share and with the decline in the relative price of investment goods.
However, our estimates of the role of the decline in the relative price of
investment for the decline in the labor share do not change once we
incorporate heterogeneity across countries and industries in changes in
the skill composition of the labor force.
3.Depreciation, Technology, and Inequality
The first paper we discussed documented a pervasive decline in the labor
share since the early 1980s and argued that the decreasing relative price
of investment goods played an important role for this decline. In related
work, Piketty (2014) and Piketty and Zucman (2014) discussed long-term
movements in capital shares and highlighted the comovement between
increasing capital shares and increasing capital-output ratios. An
emerging literature motivated by these facts stresses that the
interpretation of these trends depends on whether one considers concepts
that are inclusive or exclusive of depreciation. For example, Krusell and
Smith (2014) argue that the exclusion of depreciation significantly
changes Piketty's predictions of how a growth slowdown would impact the
capital-output ratio.
The analysis in Karabarbounis and Neiman (2014a) is done in terms of gross
variables, whereas the analysis in Piketty (2014) is done in terms of
variables measured net of depreciation. The labor share is typically
measured as compensation to labor relative to gross value added ("gross
labor share"). One argument in favor of using gross concepts is based on
empirical grounds. Depreciation is an imputed item in the national income
and product accounts, and so the principle of using more direct
measurements would argue for the use of gross instead of net concepts.
Since the measurement of depreciation differs across countries, the use of
net concepts is even more problematic in an international context. On the
other hand, depreciation represents a payment implicitly consumed by the
use of fixed capital. As a result, this flow cannot be consumed by
households. At least since Weitzman (1976), therefore, economists have
recognized that net concepts such as the net domestic product and the net
labor share may be more closely associated with welfare and inequality
than their gross counterparts.
Depreciation, typically treated in macroeconomics as an uninteresting
accounting concept, is a crucial input in understanding the joint dynamics
of factor shares and inequality. In an important new paper, Rognlie (2014)
highlights a mismatch between the behavior of labor's share of income net
of depreciation ("net labor share") -- a focus of Piketty's theory -- and
estimates of the elasticity of substitution between capital and labor that
typically come from studies of the gross labor share (including the
estimates in Karabarbounis and Neiman, 2014a). In fact, in his review of
Piketty (2014), Summers (2014) also highlights the key role of
depreciation:
"Piketty argues that the economic literature supports his assumption
that returns diminish slowly (in technical parlance, that the elasticity
of substitution is greater than 1), and so capital's share rises with
capital accumulation. But I think he misreads the literature by conflating
gross and net returns to capital. It is plausible that as the capital
stock grows, the increment of output produced declines slowly, but there
can be no question that depreciation increases proportionally. And it is
the return net of depreciation that is relevant for capital accumulation.
I know of no study suggesting that measuring output in net terms, the
elasticity of substitution is greater than 1, and I know of quite a few
suggesting the contrary."
Capital Depreciation and Labor Shares Around the World: Measurement and
Implications (Karabarbounis and Neiman, 2014b) documents the global
patterns of depreciation and labor shares and explains the implications of
these patterns for inferring the shocks that hit the economy, the
structure of production, and inequality. Our main empirical finding is
that both gross and net labor shares have in general declined around the
world over the past four decades. Some countries, including the United
States, experienced increases in the value of depreciation as a share of
gross domestic product. As a result, these countries experienced smaller
declines in their net labor share relative to their gross labor share.
However, the average economy in the world experienced a decline of similar
magnitude in both measures. Further, the cross-country pattern of declines
in the net labor share closely resembles the cross-country pattern of
declines in the gross labor share.
To understand the implications of these trends, we develop a simple
variant of the neoclassical growth model in which the production function
uses labor and two types of capital. Labor and aggregate capital combine
with an elasticity of substitution greater than one. One type of capital
depreciates at a low rate (for example, structures and transportation
equipment) and the other type depreciates at a high rate (for example,
capital related to information and communication technologies).
Depreciation as a share of GDP introduces a wedge between the net and the
gross labor share. For a given decline in the gross labor share, the
decline in the net labor share is smaller when the increase in
depreciation's share of GDP is larger. Consistent with measurement
practices in national income and product accounts, depreciation as a share
of GDP fluctuates in response to shifts in the composition of capital and
to changes in the aggregate nominal capital-output ratio.
In this environment, we confirm the hypothesis of Summers (2014) and
reproduce the finding of Rognlie (2014) that gross and net labor shares
may move in different directions in response to changes in the real
interest rate. A decline in the interest rate affects the net rental rate
proportionately more than the gross rental rate. The large increase in the
nominal capital-output ratio increases depreciation as a share of GDP,
which in turn mutes the decline of the net labor share relative to the
decline of the gross labor share. For reasonable parameterizations,
reductions in the real interest rate cause the net labor share to increase
despite a decrease in the gross labor share.
Very few countries, however, experienced opposite movements in net and
gross labor shares over the past 40 years. We demonstrate theoretically
that, unlike shocks to the real interest rate, technology-driven changes
in the relative price of investment goods cause gross and net labor shares
to always move in the same direction. Declines in the price of capital
tend to offset increases in the real capital-output ratio, which dampens
the increase in depreciation's share of GDP and allows net and gross labor
shares to fall together. This dynamic results in behavior at odds with the
description in Summers (2014) because declines in the relative price of
investment affect both the net and the gross return to capital
proportionally. Equivalently, in response to changes in the relative price
of investment, the elasticities of substitution in the gross and the net
production functions are on the same side of (or equal to) one.
Collectively, these theoretical and empirical results can reconcile the
global decline in the relative price of investment, as analyzed in
Karabarbounis and Neiman (2014a), with the narrative of Piketty (2014)
that rests on a high net elasticity of substitution.
A contribution of this work is to clarify that both gross and net concepts
can be useful and complementary. The argument for using net domestic
product and net labor shares instead of their gross counterparts is that
the former are more relevant for welfare and inequality. It is useful to
note that this logic most naturally applies in an economy's steady state.
It is not obvious whether gross or net concepts are most informative for
thinking about welfare and inequality during the economy's transition.
In the simple variant of the neoclassical growth model that we described
above, there are two types of agents, workers and capitalists. Workers
cannot save and simply consume their labor earnings in every period. The
dynamics of consumption inequality between these two groups are governed
by the assumption that capitalists, in contrast to workers, are forward
looking and have a positive saving rate. Using simple examples, we
illustrate that both the gross and the net labor shares can be jointly
informative about the evolution of consumption inequality. The net labor
share perfectly summarizes inequality between workers and capitalists in
the steady state of the model as workers consume their wages each period
and capitalists consume their capital income net of depreciation expenses.
This simple relationship, however, ceases to hold along the transition.
Intuitively, the net labor share only captures the net income position of
workers relative to capitalists in a specific time period. Net income
inequality need not translate into consumption inequality when capitalists
are forward looking and can save to achieve an optimal allocation of
resources across time.
4. Work in Progress and Future Plans
The decline in the labor share has generated attention in part due to its
association with increasing inequality. Our view is that the labor share
is a useful starting point for thinking about distributional issues, but
more work is necessary in order to link factor shares to income and wealth
inequality. For example, even in a very stylized model with a striking
division between hand-to-mouth workers and forward-looking capitalists,
Karabarbounis and Neiman (2014b) demonstrate the inadequacy of either
gross or net labor share measures to fully capture inequality in a
satisfactory way outside of the steady state.
A fruitful direction for future research is to develop more realistic
models that help us understand the joint dynamics of inequality and factor
shares. Overall income inequality depends on a host of additional factors,
such as the correlation of capital income with labor income and each of
the within components of labor and capital income inequality, that also
change when some shock causes the labor share to fluctuate. In research in
progress together with Jon Adams (a graduate student at Chicago Econ), we
examine theoretically the link between factor shares and overall income
inequality in a rich model with incomplete markets, worker heterogeneity
along various dimensions, bequests, redistributive taxation, and
production that combines skilled and unskilled labor with different
capital goods.
In other research in progress together with Sara Moreira (a graduate
student at Chicago Econ), we have started creating a dataset of labor
shares in the United States at the industry-state level between the late
1960s and 2012. As a first step in this empirical analysis, we have
focused on the measurement of the labor component of sole proprietors'
income at the industry-state level, using both aggregate and micro data.
This dataset will allow researchers to better understand the patterns of
labor share changes at a less aggregated level and how these patterns are
related to industry and regional economic outcomes.
Finally, the decline in the labor share has been associated with
significant changes in the flow of funds between households and
corporations. "Declining Labor Shares and the Global Rise of Corporate
Savings" (Karabarbounis and Neiman, 2012) documents a substantial change
in the distribution of saving between households and corporations. Using
sectoral data from more than 50 countries, we show that by 2010,
corporations, as opposed to households and governments, supplied saving
that financed over 60% of global investment. The corresponding number in
the early 1980s was roughly 40%.
Declines in the relative price of investment are consistent both with the
decline in the labor share and the global rise of corporate saving.
Corporate saving increases as it is the cheapest means to finance
increased desired investment. Investment here should be broadly
interpreted as encompassing both tangibles and intangibles. The latter
types of investment have increased dramatically over the past 30 years
(Corrado, Hulten, and Sichel, 2009).
Selected references to the papers mentioned are available in the web
version of this newsletter at http://www.EconomicDynamics.org/newsletter.htm
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Review of Economic Dynamics: Letter from the Managinging Editor
The Review of Economic Dynamics (RED) is the official journal of the
Society for Economic Dynamics. The journal publishes meritorious original
contributions to dynamic economics. The scope of the journal is intended
to be broad and to reflect the view of the Society for Economic Dynamics
that the field of economics is unified by the scientific approach to
economics. We publish contributions in any area of economics provided they
meet the highest standards of scientific research. In particular, RED
publishes original articles on applications of dynamic economic theory to
a wide variety of problems in economics. Related measurement and empirical
papers are also welcomed.
Editorial Board Composition
Since last year, there have been a couple of changes to the Editorial
Board composition. Galina Vereshchagina (Arizona State) has joined us as
an Associate Editor. Special thanks, on behalf of the Society, to David
Backus, Urban Jermann, Tim Kehoe, and Matt Mitchell, who have resigned
from their positions as Editors and Associate Editors after many years of
service.
As of September 2014, the Editors of RED are: Marco Bassetto (UCL), Jesus
Fernandez-Villaverde (University of Pennsylvania), Jonathan Heathcote
(Federal Reserve Bank of Minneapolis), Vincenzo Quadrini (USC), Martin
Schneider (Stanford), and Gianluca Violante (NYU).
The Associate Editors are: Cristina Arellano (University of Minnesota),
Ariel Burnstein (UCLA), Hector Chade (ASU), Tim Cogley (NYU), Jan Eeckhout
(UCL), Gino Gancia (CREI), Fatih Guvenen (University of Minnesota), Matteo
Iacoviello (Federal Reserve Board), Nir Jaimovich (Duke), Maurizio
Mazzocco (UCLA), Virgiliu Midrigan (NYU), Fabrizio Perri (University of
Minnesota), Diego Restuccia (University of Toronto), Richard Rogerson
(Princeton), Andrea Tambalotti (New York Fed), Galina Vereshchagina (ASU),
Pierre-Oliver Weil (UCLA), Steve Williamson (St. Louis Fed), and Christian
Zimmermann (St. Louis Fed).
Turnaround Statistics
RED strives to deliver fast and efficient turnaround of manuscripts,
without compromising the quality of the refereeing process. Besides desk
rejections, virtually all submitted manuscripts receive two referee
reports. In 2013, RED received 296 submissions (we had 270 submissions in
2012). As of July 2014, all of these submissions had already received at
least a first decision. The mean processing time from submission to first
decision was 64 days.
The table below describes the distribution of first decisions by type:
desk reject, reject after review, and revise and resubmit (which includes
both minor and major revisions requested).
Distribution of First Decision Times on 2013 Submissions
Number of Number of desk Number of Number of
decisions rejects rejects R&R
Total 296 126 120 50
Within 3 months 66% 100% 43% 33%
3 to 4 months 16% 0% 28% 27%
4 to 5 months 7% 0% 12% 13%
5+ months 11% 0% 28% 27%
Average days since submission
64 6 100 120
Note that 82% of all submissions were dealt with within 4 months, and only
11% of all submissions took longer than 5 months.
Among all the manuscripts with a final disposition in 2013, the acceptance
rate was 12%. This acceptance rate, comparable to that of other top
economics journals, reflects the fact that only submissions of the highest
quality are selected for publication in the Review. The continuous rise of
the Impact factor for the Review (see the next section) is proof of this
commitment to constantly improving our standards of publication.
Impact Factors
The table below shows two citation indexes for RED and for a comparison
group of journals. The first one, reported since 2008, is the 2-Year ISI
Impact Factor (one of the most widely used indicator of a journal's
quality). This index is calculated as the number of times articles
published in year t-1 and t-2 in a given journal were cited by all
journals during year t. The second is the IDEAS/RePEc Recursive Discounted
Impact Factor which 1) weighs each citation by the Impact Factor of the
citing Journal -- this Impact Factor being itself computed recursively in
the same fashion, and 2) considers all articles ever published in a given
journal, but divides each citation by its age in years. The Discounted
Recursive Impact Factors are normalized so that the average citation has a
weight of 1. In other words, this index gives more weight to citations in
good journals, and to recent citations.
2-Year ISI Impact Factors and Recursive Discounted Impact Factor (last)
column)
2013 2012 2011 2010 2009 2008 August 2014
RED 1.764 1.602 1.358 1.259 0.975 0.954 1.512
JEG 3.125 2.250 2.458 2.468 3.083 2.542 2.546
AEJ:Ma 2.887 3.191 3.800 -- -- -- 2.205
JME 2.065 1.649 1.892 1.654 1.755 1.429 1.725
IER 1.415 1.162 1.559 1.516 1.030 1.150 0.719
JET 0.919 1.069 1.235 1.112 1.092 1.224 0.896
JMCB 0.954 1.104 1.093 1.150 1.194 1.422 0.711
JEDC 1.057 0.807 0.855 1.117 1.097 0.885 0.497
MD 0.913 0.420 0.452 0.763 0.517 0.516 0.419
As witnessed by the table above, the Impact Factor of RED continues its
steady growth. Moreover, the Recursive Discounted IF shows that articles
published in RED are very well cited by articles published in the top
economics journals.
Upcoming Special Issues
RED relies predominantly on regular submissions of manuscripts. Throughout
our history, we have also published special issues representing the
frontier of academic research on topics which are of particular interest
to members of the Society. Articles in special issues are usually selected
from a broad call for papers, as well as through direct solicitations.
They all go through a full refereeing process. Guest Editor Mark Gertler
(NYU) and our own Steve Williamson (St. Louis Fed), are currently editing
a special issue on "Money, Credit, and Financial Frictions" which is
scheduled to appear in the January 2015 issue of RED. In addition, Guest
Editors Guido Menzio (Penn) and Randy Wright (Wisconsin) are preparing a
special issue in honor of Dale Mortensen, which is slated to be published
in the January 2016 issue.
Sincerely,
Matthias Doepke, Managing Editor
Review of Economic Dynamics
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Society for Economic Dynamics: Letter from the President
Dear SED Friends:
As expected, the 25th SED meeting in Toronto last June was a success.
This was made possible thanks to the lead of Marina Azzimonti and Veronica
Guerrieri, and their Program Committee, in setting up a great program,
with invited lectures by Nicholas Bloom, Larry Christiano and Ivįn
Werning. The Rotman School of Management of the University of Toronto was
a very suitable venue for our meeting, and Matt Mitchell and Diego
Restuccia deserve the credit for the smooth logistics of the meeting. Our
25th SED meeting will also be remembered for our tribute to Dale, who left
us at the beginning of the year, with two special sessions and a lunch
panel. You can watch the video of the panel, as well as of the plenary
speakers, via our web page. To all of these, and to all participants, my
sincere thanks.
As I announced at our conference dinner at the yearly board meeting, it
was decided to establish the "The Friends of the Society for Economic
Dynamics." Our charter establishes that the members of SED are the same
members of the board, but after 25 years of successful meetings and the
establishment of our journal, the Review of Economic Dynamics, as a
leading journal in the frontier of economic research, many more people (I
hope you too, if you are reading this newsletter) feel 'empathy for SED'.
We wanted to recognize this fact. To become a Friend of SED, as with any
friendship, will be voluntary. Therefore, it will not be required to be a
friend to submit to, or present a paper at, our meetings, nor will the
selection be based on who is a friend and who is not. To be a Friend of
SED a minimal voluntary contribution to support the Society will be
requested (and of course, larger contributions will be most welcome!).
You may ask, what's the point? It is twofold: first, to have a more
explicit account of who we are beyond who is presenting in a given year at
our meeting; second, to slowly increase the capacity of the Society to
have a financial safeguard to make sure that, looking at the future, SED
and RED will continue to provide the service that we all want to provide.
Just as a logistical matter, we will start the process of 'becoming a
Friend of SED' with the registration of our 2015 meeting, where more
information will be provided. The Friends of SED will become our reference
mailing list for direct information about SED events and other news, and
it is our plan to add other small fringe benefits for them (I should
probably say 'us'). In any case it is not an issue of benefits but of
supporting and strengthening our Society. I hope you will understand and
become a friend!
In case you are attending the ASSA meetings in Boston, there will be two
SED sessions organized by Yuriy Gorodnichenko (January 3) and Benjamin
Moll (January 4). I also want to thank them and Larry Christiano who has
been coordinating these sessions in the last few years.
As you know, our next SED meeting will take place in Warsaw on June 25-27,
2015. Vasco Carvalho and Greg Kaplan have already set up the program
committee and I am sure they will put together a first rate program of
invited and contributed sessions. I can already say, on their behalf, that
we will have three great plenary speakers: Richard Blundell, Charles Jones
and Samuel Kortum. In fact, Richard will deliver the 1st Dale Mortensen
Lecture.
Warsaw is the hometown of a great economist whose work influenced some of
our work, and as part of the program we will have a special session in
Honor of Leo Hurwicz: "Mechanism Design in Macroeconomics." The local
organizers -- Micha³ Brzoza-Brzezina, Ryszard Kokoszczyński, Krzysztof
Makarski, and Jan Werner -- are already preparing what I think will also
be a memorable meeting, organized by Narodowy Bank Polski (the central
bank of Poland) and hosted by the University of Warsaw. For those of you
coming, I would recommend not missing any of the events...
Warsaw will be my last meeting as president of the Society and, as it was
announced in Toronto, Tim Kehoe will succeed me as president for the
following three years. Warsaw will also mark the replacement of our almost
life-long officers: Marina Azzimonti will replace Christian Zimmermann as
secretary of SED and Erwan Quintin will replace Ellen McGrattan as
treasurer. I am very grateful to all of them, but I think Warsaw will be a
better place to thank them properly; the outgoing officers for the
incredible work done, the incoming ones for accepting to be the new
officers of the Society.
I am looking forward to seeing you in Warsaw
Ramon Marimon, President
Society for Economic Dynamics
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Society for Economic Dynamics: 2015 Meeting Call for Papers
The next annual meeting of the Society of Economic Dynamics will take
place in Warsaw, Poland, from 25-27 June 2015. We are glad to announce
keynote speeches by
Richard Blundell (University College, London)
Charles Jones (University of California, Berkeley)
Samuel Kortum (Yale University)
You can now submit your paper for the conference using ConferenceMaker
until February 15th, 2015. We are looking forward to many exciting
submissions for the academic program!
https://editorialexpress.com/conference/SED2015
All information on the conference can be accessed from the SED homepage.
http://www.economicdynamics.org/sed2015.htm
We hope to see you next year in Poland. Best wishes,
Vasco Carvalho and Greg Kaplan
2015 SED Program Chairs
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Book Review: Miao's Economic Dynamics in Discrete Time
Economic Dynamics in Discrete Time
by Jianjun Miao
There was a time where teaching graduate level methods applicable in
modern macroeconomic theory was a challenge for those who wanted to use a
textbook. Now there is a plethora of books, each which their emphasis, but
none comprehensive so that the material can be introduced and then
expanded from a single book.
The newcomer, Miao's book, is the first to offer the preliminaries,
including the mathematical ones, the proofs, the applications and some
review of the literature all in one book. The one limitation, as its title
indicates, is that the book concentrates on discrete time. A future volume
will cover continuous time, as well as topics that are best treated in
continuous time.
So what does the book cover? The preliminaries cover difference equations,
Markov and stationary processes. A section looks at dynamic programming
and its variants, with several common applications. It goes as far as
discussing partial information problems, different numerical methods, and
structural estimation. The book then continues with a series of
applications, such as complete and incomplete markets, search and
matching, New Keynesian models, dynamic games and recursive contracts. The
appendices cover all the mathematical ingredients that are required beyond
a typical undergraduate curriculum. A solutions manual for some of the
exercises, and Matlab and Dynare code are also available.
Economic Dynamics in Discrete Times is published by MIT Press.
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Impressum
The EconomicDynamics Newsletter is a free supplement to the Review of
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responsible editors are Christian Zimmermann (RED associate editor),
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The EconomicDynamics Newsletter is published twice a year in April and
November.
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