Output distribution
Baqaee and Farhi show how structural elasticities of substitution, network linkages, structural returns to scale, and the extent of factor reallocation magnify negative shocks and attenuate positive one. As a result, the output distribution is fat-tailed and “has a lower mean even when shocks are symmetric and thin-tailed.”
The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten’s Theorem
Authors: David Rezza Baqaee, Emmanuel Farhi
From: LSE – Harvard University
Unemployment distribution
Dupraz and al. develop a microfounded plucking model of the business cycle to account for the asymmetry of the distribution of unemployment. They argue that unemployment arises from search frictions in the labor market and is skewed due to downward nominal wage rigidity. Contrary to earlier models of downward nominal wage rigidity, their model is consistent with optimizing behavior.
A Plucking Model of Business Cycles
Authors: Stéphane Dupraz, Emi Nakamura, Jón Steinsson
From: Columbia University
