We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time-inconsistent preferences. Using panel data on the choices of single women with children from the NLSY 1979, we provide estimates of the degree of...

We examine the small sample properties of tests of rational expectations models. We show using Monte Carlo experiments that these tests can be extremely biased toward rejection for sample sizes typical in applied research. These biases are important when the time series examined are highly...

Recent studies find that consumption is excessively sensitive to income. These studies assume that income is stationary around a deterministic trend. The data, however, do not reject the hypothesis that disposable income is a random walk with drift. If income is indeed a random walk, then the...

Until recently, economists widely believed that economic activity had become less variable in the United States following the end of World War II. Challenging this belief, new research suggests that key historical time series are spuriously volatile, a finding that is highly controversial. Data...

Measured productivity is strongly procyclical. Real business cycle theories suggest that actual fluctuations in productivity are the source of fluctuations in aggregate output. Keynesian theories maintain that fluctuations in aggregate output come from shocks to aggregate demand. Keynesian...

Non-competitive conduct can be assessed by estimating the size of the markup or Lerner index achieves in a market. The markup implies a price elasticity of demand faced by the representative firm. For a given markup, non-competitive conduct that is insensitive to the value of the monopoly. To...

What shocks account for the business cycle frequency and long run movements of output and prices? This paper addresses this question using the identifying assumption that only supply shocks, such as shocks to technology, oil prices, and labor supply affect output in the long run. Real and...

A firm may acquire additional capital input by purchasing new capital or by increasing the utilization of its current capital. The margin between capita accumulation and capital utilization is studied in a model of dynamic factor demand where the firm chooses capital, labor, and their rates of...

Much recent work emphasizes the joint nature of the consumption decision and the portfolio allocation decision. In this paper, we compare two formulations of the Capital Asset Pricing Model. The traditional CAPM suggests that the appropriate measure of an asset's risk is the covariance of the...