Market power arises in the case where a seller is aware that raising output will depress price. In the profit-maximizing equilibrium with market power, price exceeds marginal cost. The Lerner index---the ratio of price less marginal cost to the price---is a widely accepted measure of market...

In modern economies, sharp increases in unemployment from major adverse shocks result in long periods of abnormal unemployment and low output. This chapter investigates the processes that account for these persistent slumps. The data are from the economy of the United States, and the discussion...

Over the past few decades, worldwide real interest rates have trended downward. The real interest rate describes the terms of trade between risk-tolerant and risk-averse investors. Debt pays off equally across contingencies at a given future date, so debt is valuable to risk-averse investors to...

In recessions, all types of investment fall, including employers' investment in job creation. The stock market falls more than in proportion to corporate profit. The discount rate implicit in the stock market rises, and discounts for other claims on business income also rise. According to the...

Government guarantees of private debt deplete equity. The depletion is greatest during periods when the probability of a guarantee payoff is highest. In a setting otherwise subject to Modigliani-Miller neutrality, firms issue guaranteed debt up to the limit the government permits. Declines in...

The evolution of the aggregate labor market is far from smooth. I investigate the success of a macro model in replicating the observed levels of volatility of unemployment and other key variables. I take variations in productivity growth and in exogenous product demand (government purchases plus...

New data compel a new view of events in the labor market during a recession. Unemployment rises almost entirely because jobs become harder to find. Recessions involve little increase in the flow of workers out of jobs. Another important finding from new data is that a large fraction of workers...

Adjustment costs determine the dynamics of the response of an industry's output to a shift in demand. Absent any adjustment costs, an increase in demand not accompanied by any change in factor prices raises output, labor, capital, and materials in the same proportion. In the presence of...

If firms purchase capital up to the point where there is no further marginal benefit, and the firms' securities are equal in value to the capital, then the market value of securities measures the quantity of capital. I explore the implications of this hypothesis using data from U.S. non-farm,...

A time series is concentrated if the expectation of its current value is a negative function of a moving average of past values up to all but the most recent past. Job destruction has the property of concentration in a model of heterogeneous jobs because an adverse shock destroys jobs in plants...