Accounting for observed fluctuations in aggregate employment, consumption, and real wage using the optimality conditions of a representative household often requires preferences that are incompatible with economic priors (e.g., Mankiw, Rotemberg, and Summers 1985). This discrepancy between the...

Data from a heterogeneous-agents economy with incomplete asset markets and indivisible labor supply are simulated under various fiscal policy regimes and an approximating representative-agent model is estimated. Preference and technology parameter estimates of the representative-agent model are...

This paper assesses biases in policy predictions due to the lack of invariance of "structural" parameters in representative-agent models. We simulate data under various fiscal policy regimes from a heterogeneous-agents economy with incomplete asset markets and indivisible labor supply. Imperfect...

We compute the welfare cost of egalitarianism - a tax policy that equalizes wages for all. The benchmark "laissez-faire" economy has features a la Aiyagari (1994) with endogenous labor supply. A progressive income tax provides insurance against income risks but at the cost of efficiency: it...

We identify the cyclical turning points of 74 U.S. manufacturing industries and uncover new empirical regularities: (i) Cyclical phase shifts are highly concentrated around the aggregate turning points; (ii) In contrast to the conventional notion of a sudden stop and slow recovery, troughs are...

Many cases of successful economic development, such as South Korea, exhibit long periods of sustained capital accumulation rates. This empirical feature is at odds with the standard neoclassical growth model which predicts initially high and then declining capital accumulation rates. We show...

We construct a family model of labor supply that features adjustment along both the intensive and extensive margin. Intensive margin adjustment is restricted to two values: full time work and part-time work. Using simulated data from the steady state of the calibrated model, we examine whether...