On February 6, more than 30 members and guests of the NBER's Program on Economic Fluctuations and Growth met to discuss their research. Michael Kremer, of NBER and MIT, and Mark W. Watson, of NBER and Princeton University, chose the following papers for presentation:
Shubham Chaudhuri, Columbia University, "Income Seasonality, Precautionary Saving, and Borrowing Constraints in an Agrarian Economy"
Discussant: Christopher D. Carroll, NBER and Johns Hopkins University
Olivier J. Blanchard, NBER and MIT, "The Medium Run"
Discussant: Robert E. Hall, NBER and Stanford University
Per Krusell, University of Rochester; Lee Ohanian, Federal Reserve Bank of Minneapolis; Jose Victor Rios-Rull, Federal Reserve Bank of Minneapolis; and Giovanni Violante, University College, London, "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis"
Discussant: Lawrence F. Katz, NBER and Harvard University
Peter Rupert, Federal Reserve Bank of Cleveland; and Richard Rogerson and Randall Wright, NBER and University of Pennsylvania, "On the Macroeconomic Implications of Models with Household Production"
Discussant: John F. Kennan, NBER and University of Wisconsin
Giancarlo Corsetti, Yale University, and Paolo Pesenti, NBER and Princeton University, "Welfare and Macroeconomic Interdependence"
Discussant: Maurice Obstfeld, NBER and University of California, Berkeley
Philippe Aghion, University College, London; Abhijit Banerjee, MIT; and Thomas Piketty, CEPREMAP, "Dualism and Macroeconomic Volatility"
Discussant: Paul M. Romer, NBER and Stanford University
Households in many poor agrarian economies derive their income from agriculture which depends on rain. This raises the possibility that households accumulate information about future cash inflows (that is, harvests) from rainfall patterns early on in the crop cycle. Using detailed data from three villages in India, Chaudhuri explores whether households use this information in the ways suggested by modern consumption theories. He finds fairly strong support for the joint hypothesis of precautionary saving and forward-looking behavior in the presence of borrowing constraints.
Blanchard considers the evolution of OECD countries over the last 30 years. Motivated by the very different shares of unemployment and capital in Continental Europe versus Anglo-Saxon countries, he offers a broad interpretation of events: Continental Europe was affected by strong adverse labor supply shifts in the 1970s and by strong adverse labor demand shifts in the 1980s. The earlier supply shifts largely reflected the failure of wages to react to the slowdown in productivity and the increase in oil prices. The more recent labor demand shifts are attributable to a combination of change in the distribution of rents from workers to firms, and technological progress biased against labor. Together with the implied dynamics of employment and capital accumulation, these labor supply and demand shifts can explain the increase and persistence in unemployment, as well as the increase in capital shares, that have characterized most Continental European countries. …