Bio
Hi! I am a macroeconomist at Berkeley. My research focuses on monetary and fiscal policy, business cycles and macroeconomic measurement. I also have interests overlapping with a broader set of fields including industrial organization, labor, finance, and big data and machine learning methods. I like to work on things that can be measured and have policy implications (ideally both).
Short Bio
University of California, Berkeley
Department of Economics
685 Evans Hall, # 3880
Berkeley, CA 94720-3880
Email: enakamura@berkeley.edu, eminakamura000@gmail.com
Phone: +1 (510) 642-5837
Research
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Working Papers |
Survey Papers |
Published and Forthcoming |
Other Publications |
Unpublished Papers |
Recent Lectures and Discussions |
Popular Writing
Working Papers
(with David Bruns-Smith and Jón Steinsson)
AAbstract (click to expand): A canonical finding from earlier research is that the cross-sectional variance of income increases sharply with age (Deaton and Paxson, 1994). However, the trend in this age profile is not separately identified from time and cohort trends. Conventional methods solve this identification problem by ruling out “time effects.” This strong assumption is rejected by the data. We propose a new proxy variable machine learning approach to disentangle age, time and cohort effects. Using this method, we estimate a significantly smaller slope of the age profile of income variance for the US than conventional methods, as well as less erratic slopes for 11 other countries.
(with Jón Steinsson and Venance Riblier)
Presented at the Jackson Hole Economic Policy Symposium, August 2025.
AAbstract (click to expand): The Federal Reserve partially “looked through” the post-Covid rise in inflation and ultimately managed to bring about an “immaculate disinflation.” The Fed’s policy deviated strongly from the Taylor rule during this period. More generally, central banks with strong inflation-fighting credentials looked through post-Covid inflationary shocks yet experienced less inflation than more hawkish but less credible central banks. In light of this episode, we assess the degree to which the Taylor rule is descriptive, and the degree to which it should be viewed as prescriptive. While the Taylor rule (generally) fits well during the Greenspan period, it (generally) fits poorly in the early 1980s and after the early 2000s. Academic work has emphasized the role of the Taylor rule in preventing self-fulfilling fluctuations (guaranteeing determinacy). These concerns can be addressed with a shock-contingent commitment and are fragile to deviations from fully rational expectations. We discuss three reasons why optimal policy may not always imply a one-for-one response of interest rates to inflation (forward guidance, correlated shocks, and “long and variable lags”). The main challenge arising from such policies is not indeterminacy but erosion of inflation-fighting credibility and potential deanchoring of long-run inflation expectations. Only central banks with strongly anchored inflation expectations and large amounts of inflation-fighting credibility are likely to be able to look through inflationary shocks.
Replication Package
(with Miguel Acosta, Andreas Mueller and Jón Steinsson)
Revise and Resubmit at the Journal of Political Economy.
AAbstract (click to expand): We study the macroeconomic effects of unemployment insurance (UI) benefit extensions in the United States at short and long durations. To do this, we develop a new state level dataset on trigger variables for UI extensions and a “UI Benefits Calculator” based on detailed legislative and administrative sources spanning five decades. Our identification approach exploits variation across states in the options governing the Extended Benefits program. We find that UI extensions during time periods when UI benefit durations are already long—such as in the Great Recession—have minimal effects. However, UI extensions at shorter initial durations have substantial effects on the unemployment rate and the number of people receiving UI, with larger estimates during Covid. We relate our estimates to microeconomic estimates of the effects of UI extensions through the lens of partial and general equilibrium models.
Survey Papers
(with Jón Steinsson)
Annual Review of Economics, 5, 133-163, 2013.
AAbstract (click to expand): We review recent evidence on price rigidity from the macroeconomics literature and discuss how this evidence is used to inform macroeconomic modeling. Sluggish price adjustment is a leading explanation for the large effects of demand shocks on output and, in particular, the effects of monetary policy on output. A recent influx of data on individual prices has greatly deepened macroeconomists’ understanding of individual price dynamics. However, the analysis of these new data raises a host of new empirical issues that have not traditionally been confronted by parsimonious macroeconomic models of price setting. Simple statistics such as the frequency of price change may be misleading guides to the flexibility of the aggregate price level in a setting in which temporary sales, product churning, cross-sectional heterogeneity, and large idiosyncratic price movements play an important role. We discuss empirical evidence on these and other important features of micro price adjustment and ask how they affect the sluggishness of aggregate price adjustment and the economy’s response to demand shocks.
Published And Forthcoming Research Papers
(with Masao Fukui and Jón Steinsson)
Quarterly Journal of Economics, 140(4), 3015-3065, November 2025.
AAbstract (click to expand): We study the consequences of “regime-induced” exchange rate depreciations by comparing outcomes for peggers versus floaters to the U.S. dollar in response to a dollar depreciation. Pegger currencies depreciate relative to floater currencies and these depreciations are strongly expansionary. The boom is associated with a fall in net exports, and (if anything) an increase in interest rates in the pegger countries. This suggests that expenditure switching and domestic monetary policy are not the main drivers of the boom. We show that a large class of existing models cannot match our estimated responses and develop a model with imperfect financial openness that can. Following a depreciation, uncovered interest parity deviations lower the costs of borrowing from abroad and stimulate the economy, as in the data. The model is consistent with (unconditional) exchange rate disconnect and the Mussa fact, even though exchange rates have large effects on the economy.
Replication Package
(with Stéphane Dupraz and Jón Steinsson)
Journal of Monetary Economics, 152, 103766, June 2025.
AAbstract (click to expand): In standard models, economic activity fluctuates symmetrically around a "natural rate" and stabilization policies can dampen these fluctuations but do not affect the average level of activity. An alternative view - labeled the "plucking model" by Milton Friedman - is that economic fluctuations are drops below the economy's full potential ceiling. We show that the dynamics of the unemployment rate in the US display a striking asymmetry that strongly favors the plucking model: increases in unemployment are followed by decreases of similar amplitude, while the amplitude of a decrease does not predict the amplitude of the following increase. In addition, business cycles last seven years on average and unemployment rises much faster during recessions than it falls during expansions. We augment a standard labor search model with downward nominal wage rigidity and show how it can fit the plucking property.
Code to Date Peaks and Troughs
Replication Package
Appendix
(with Paul Bouscasse and Jón Steinsson)
Quarterly Journal of Economics, 140(2), 835-888, May 2025.
AAbstract (click to expand): We estimate productivity growth in England from 1250 to 1870. Real wages over this period were heavily influenced by plague-induced swings in the population. Our estimates account for these Malthusian dynamics. We find that productivity growth was zero before 1600. Productivity growth began in 1600—almost a century before the Glorious Revolution. Thus, the onset of productivity growth preceded the bourgeois institutional reforms of seventeenth-century England. We estimate productivity growth of 2% per decade between 1600 and 1800, increasing to 5% per decade between 1810 and 1860. Much of the increase in output growth during the Industrial Revolution is explained by structural change—the falling importance of land in production—rather than faster productivity growth. Stagnant real wages in the eighteenth and early nineteenth centuries—Engels’ Pause—is explained by rapid population growth putting downward pressure on real wages. Yet feedback from population growth to real wages is sufficiently weak to permit sustained deviations from the “iron law of wages” prior to the Industrial Revolution.
Estimates
Appendix
Replication Package
(with Leland Farmer and Jón Steinsson)
Journal of Political Economy, 132(10), 3334-3377, October 2024.
AAbstract (click to expand): Forecasts of professional forecasters are anomalous: they are biased, and forecast errors are autocorrelated and predictable by forecast revisions. We propose that these anomalies arise because professional forecasters do not know the model that generates the data. We show that Bayesian agents learning about hard-to-learn features of the world can generate all the prominent aggregate anomalies emphasized in the literature. We show this for professional forecasts of nominal interest rates and Congressional Budget Office forecasts of gross domestic product growth. Our learning model for interest rates can explain observed deviations from the expectations hypothesis of the term structure without relying on time variation in risk premia.
Appendix
Replication Package
(with Masao Fukui and Jón Steinsson)
American Economic Journal: Macroeconomics, 15(1), 269-313, January 2023.
AAbstract (click to expand): Business cycle recoveries have slowed in recent decades. This slowdown comes entirely from female employment, as women’s employment rates converged toward men’s during the past half-century. But does the slowdown in the growth of female employment rates translate into a slowdown for overall employment rates? We estimate the extent to which women “crowd out” men in the labor market across US states, and find that it is small. Through the lens of a general equilibrium model with home production, we show this statistic implies that 60-75 percent of the slowdown in recent business cycle recoveries can be explained by female convergence.
Appendix
Replication Package
(with Jonathon Hazell, Juan Herreno and Jón Steinsson)
Quarterly Journal of Economics, 137(3), 1299-1344, August 2022.
AAbstract (click to expand): We estimate the slope of the Phillips curve in the cross section of U.S. states using newly constructed state-level price indices for nontradeable goods back to 1978. Our estimates indicate that the slope of the Phillips curve is small and was small even during the early 1980s. We estimate only a modest decline in the slope of the Phillips curve since the 1980s. We use a multiregion model to infer the slope of the aggregate Phillips curve from our regional estimates. Applying our estimates to recent unemployment dynamics yields essentially no missing disinflation or missing reinflation over the past few business cycles. Our results imply that the sharp drop in core inflation in the early 1980s was mostly due to shifting expectations about long-run monetary policy as opposed to a steep Phillips curve, and the greater stability of inflation between 1990 and 2020 is mostly due to long-run inflation expectations becoming more firmly anchored.
Appendix
State Level CPI Data (BETA)
ReadMe for State Level CPIs
Replication Package
(with Jón Steinsson and Jósef Sigurdsson)
Review of Economic Studies, 89(3), 1557-1592, May 2022.
AAbstract (click to expand): We exploit a volcanic “experiment” to study the costs and benefits of geographic mobility. In our experiment, a third of the houses in a town were covered by lava. People living in these houses were much more likely to move away permanently. For the dependents in a household (children), our estimates suggest that being induced to move by the “lava shock” dramatically raised lifetime earnings and education. While large, these estimates come with a substantial amount of statistical uncertainty. The benefits of moving were very unequally distributed across generations: the household heads (parents) were made slightly worse off by the shock. These results suggest large barriers to moving for the children, which imply that labour does not flow to locations where it earns the highest returns. The large gains from moving for the young are surprising in light of the fact that the town affected by our volcanic experiment was (and is) a relatively high income town. We interpret our findings as evidence of the importance of comparative advantage: the gains to moving may be very large for those badly matched to the location they happened to be born in, even if differences in average income are small.
Appendix
Replication Files
Slides
(with Adam Guren, Alisdair McKay, and Jón Steinsson)
Review of Economic Studies, 88(2), 669-707, March 2021.
AAbstract (click to expand): We provide new time-varying estimates of the housing wealth effect back to the 1980s. We use three identification strategies: ordinary least squares with a rich set of controls, the Saiz housing supply elasticity instrument, and a new instrument that exploits systematic differences in city-level exposure to regional house price cycles. All three identification strategies indicate that housing wealth elasticities were if anything slightly smaller in the 2000s than in earlier time periods. This implies that the important role housing played in the boom and bust of the 2000s was due to larger price movements rather than an increase in the sensitivity of consumption to house prices. Full-sample estimates based on our new instrument are smaller than recent estimates, though they remain economically important. We find no significant evidence of a boom-bust asymmetry in the housing wealth elasticity. We show that these empirical results are consistent with the behaviour of the housing wealth elasticity in a standard life-cycle model with borrowing constraints, uninsurable income risk, illiquid housing, and long-term mortgages. In our model, the housing wealth elasticity is relatively insensitive to changes in the distribution of loanto-value (LTV) for two reasons: first, low-leverage homeowners account for a substantial and stable part of the aggregate housing wealth elasticity; second, a rightward shift in the LTV distribution increases not only the number of highly sensitive constrained agents but also the number of underwater agents whose consumption is insensitive to house prices.
Local House Price Sensitivity Estimates
Online Appendix
Replication Files
(with Jón Steinsson, Patrick Sun, and Daniel Villar)
Quarterly Journal of Economics, 133(4), 1933-1980, November 2018.
AAbstract (click to expand): A key policy question is: how high an inflation rate should central banks target? This depends crucially on the costs of inflation. An important concern is that high inflation will lead to inefficient price dispersion. Workhorse New Keynesian models imply that this cost of inflation is very large. An increase in steady state inflation from 0% to 10% yields a welfare loss that is an order of magnitude greater than the welfare loss from business cycle fluctuations in output in these models. We assess this prediction empirically using a new data set on price behavior during the Great Inflation of the late 1970s and early 1980s in the United States. If price dispersion increases rapidly with inflation, we should see the absolute size of price changes increasing with inflation: price changes should become larger as prices drift further from their optimal level at higher inflation rates. We find no evidence that the absolute size of price changes rose during the Great Inflation. This suggests that the standard New Keynesian analysis of the welfare costs of inflation is wrong and its implications for the optimal inflation rate need to be reassessed. We also find that (nonsale) prices have not become more flexible over the past 40 years.
Appendix
Slides
ELI Concordance
Replication Material
Press: WSJ (8/19/16), FT (3/16/18), Forbes (8/19/16)
(with Jón Steinsson)
Quarterly Journal of Economics, 133(3), 1283-1330, August 2018.
AAbstract (click to expand): We present estimates of monetary non-neutrality based on evidence from highfrequency responses of real interest rates, expected inflation, and expected output growth. Our identifying assumption is that unexpected changes in interest rates in a 30-minute window surrounding scheduled Federal Reserve announcements arise from news about monetary policy. In response to an interest rate hike, nominal and real interest rates increase roughly one-for-one, several years out into the term structure, while the response of expected inflation is small. At the same time, forecasts about output growth also increase—the opposite of what standard models imply about a monetary tightening. To explain these facts, we build a model in which Fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals. Our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output.
Appendix
Slides
Replication Files
Policy News Shocks (original sample period): Policy News Shocks constructed by Acosta, Brennan, and Jacobson for an updated sample period may be found here.
(with Alisdair McKay and Jón Steinsson)
Economica, 84, 820-831, October 2017.
AAbstract (click to expand): We present a simple model with income risk and borrowing constraints that yields a ‘discounted Euler equation’. This feature of the model mutes the extent to which news about far future real interest rates (i.e. forward guidance) affects current outcomes. We show that this simple model approximates the outcomes of a rich model with uninsurable income risk and borrowing constraints in response to a forward guidance shock. The model is simple enough to be easily incorporated into simple New Keynesian models. We illustrate this with an application to the zero lower bound.
(with Eric Anderson, Benjamin Malin, Jón Steinsson, and Duncan Simester)
Journal of Monetary Economics, 90, 64-83, October 2017.
AAbstract (click to expand): How do retailers react to cost changes? While temporary sales account for 95% of price change in our data, retail prices respond to a wholesale cost increase entirely through the regular price. Sales actually respond temporarily in the opposite direction from regular prices, as though to conceal the price hike. Additional evidence from responses to commodity cost and local unemployment shocks, as well as broader evidence from BLS data, reinforces these findings. Institutional evidence indicates that sales are complex contingent contracts, determined substantially in advance. In a standard price-discrimination model, these institutional practices leave little money “on the table”.
(with Jón Steinsson and Dmitriy Sergeyev)
American Economic Journal: Macroeconomics, 9(1), 1-39, January 2017.
AAbstract (click to expand): We provide new estimates of the importance of growth-rate shocks and uncertainty shocks for developed countries. The shocks we estimate are large and correspond to well-known macroeconomic episodes such as the Great Moderation and the productivity slowdown. We compare our results to earlier estimates of “long-run risks” and assess the implications for asset pricing. Our estimates yield greater return predictability and a more volatile price-dividend ratio. In addition, we can explain a substantial fraction of cross-country variation in the equity premium. An advantage of our approach, based on macroeconomic data alone, is that the parameter estimates cannot be viewed as backward engineered to fit asset pricing data. We provide intuition for our results using the recently developed framework of shock-exposure and shock-price elasticities.
Figure A.1
Data and Programs
(with Alisdair McKay and Jón Steinsson)
American Economic Review, 106(10), 3133-3158, October 2016.
AAbstract (click to expand): In recent years, central banks have increasingly turned to forward guidance as a central tool of monetary policy. Standard monetary models imply that far future forward guidance has huge effects on current outcomes, and these effects grow with the horizon of the forward guidance. We present a model in which the power of forward guidance is highly sensitive to the assumption of complete markets. When agents face uninsurable income risk and borrowing constraints, a precautionary savings effect tempers their responses to changes in future interest rates. As a consequence, forward guidance has substantially less power to stimulate the economy
Programs
Erratum
(with Jón Steinsson and Miao Liu)
American Economic Journal: Macroeconomics, 8(3), 113-144, July 2016.
AAbstract (click to expand): China has experienced remarkably stable growth and inflation in recent years according to official statistics. We use systematic discrepancies between cross-sectional and time-series Engel curves to construct alternative estimates of Chinese growth and inflation. Our estimates suggest that official statistics present a smoothed version of reality. Official inflation rose in the 2000s, but our estimates indicate that true inflation was still higher and consumption growth was overstated. In contrast, inflation was overstated and growth understated during the low-inflation 1990s. These patterns hold for the food Engel curve, and for numerous other categories, such as grain as a fraction of food.
Press: Wall Street Journal (10/19/16), Economist (3/15/14), Wall Street Journal (2/14/14), Financial Times (12/2/13)
(with Jón Steinsson)
American Economic Review, 104(3), 753-792, March 2014.
AAbstract (click to expand): We use rich historical data on military procurement to estimate the effects of government spending. We exploit regional variation in military buildups to estimate an “open economy relative multiplier” of approximately 1.5. We develop a framework for interpreting this estimate and relating it to estimates of the standard closed economy aggregate multiplier. The latter is highly sensitive to how strongly aggregate monetary and tax policy “leans against the wind.” Our open economy relative multiplier “differences out” these effects because monetary and tax policies are uniform across the nation. Our evidence indicates that demand shocks can have large effects on output.
Technical Appendix
Erratum
How to Get Military Prime Contract Data
Vox Article: Does Fiscal Stimulus Work in a Montary Union? Data and Programs
(with Jón Steinsson, Robert Barro and José Ursúa)
American Economic Journal: Macroeconomics, 5(3), 35-74, July 2013.
AAbstract (click to expand): We estimate an empirical model of consumption disasters using new data on consumption for 24 countries over more than 100 years, and study its implications for asset prices. The model allows for partial recoveries after disasters that unfold over multiple years. We find that roughly half of the drop in consumption due to disasters is subsequently reversed. Our model generates a sizable equity premium from disaster risk, but one that is substantially smaller than in simpler models. It implies that a large value of the intertemporal elasticity of substitution is necessary to explain stock-market crashes at the onset of disasters.
Web Appendix
Data and Programs
Vox Article: Disasters, Recoveries, and the Equity Premium
(with Jón Steinsson)
American Economic Review, 102(7), 3277-3316, December 2012.
AAbstract (click to expand): In the microdata underlying US trade price indexes, 40 percent of products are replaced before a single price change is observed and 70 percent are replaced after two price changes or fewer. A price index that focuses on price changes for identical items may, therefore, miss an important component of price adjustment occurring at the time of product replacements. We provide a model of this “product replacement bias” and quantify its importance using US data. Accounting for product replacement bias, long-run exchange rate “pass-through” is substantially higher than conventional estimates suggest, and the terms of trade are substantially more volatile.
Press: BusinessWeek (6/3/09), BusinessWeek (10/14/09) Comments on Gagnon, Mandel, and Vigfusson (2013)
(with Jón Steinsson)
Journal of Monetary Economics, 58(3), 220-233, April 2011.
AAbstract (click to expand): If consumers form habits in individual goods, firms face a time-inconsistency problem. Low prices in the future help attract customers in the present. Firms, therefore, have an incentive to promise low prices in the future, but price gouge when the future arrives. In this setting, firms benefit from "committing to a sticky price." If consumers have incomplete information about costs and demand, the firm-preferred equilibrium has the firm price at or below a "price cap." The model therefore provides an explanation for the simultaneous existence of a rigid regular price and frequent "sales".
Technical Appendix
Firm Price Commitments
(with Jón Steinsson)
Quarterly Journal of Economics, 125(3), 961-1013, August 2010.
AAbstract (click to expand): Empirical evidence suggests that as much as one-third of the U.S. business cycle is due to nominal shocks. We calibrate a multisector menu cost model using new evidence on the cross-sectional distribution of the frequency and size of price changes in the U.S. economy. We augment the model to incorporate intermediate inputs. We show that the introduction of heterogeneity in the frequency of price change triples the degree of monetary non-neutrality generated by the model. We furthermore show that the introduction of intermediate inputs raises the degree of monetary non-neutrality by another factor of three, without adversely affecting the model's ability to match the large average size of price changes. A single-sector model with a frequency of price change equal to the median, rather than the mean, generates monetary non-neutrality similar to that in our multisector model. Our multisector model with intermediate inputs generates variation in real output in response to calibrated aggregate nominal shocks that can account for roughly 23% of the U.S. business cycle.
Erratum
Appendix
Replication Code
Documentation
(with Jón Steinsson)
Quarterly Journal of Economics, 123(4), 1415-1464, November 2008.
AAbstract (click to expand): We establish five facts about prices in the U.S. economy: (1) For consumer prices, the median frequency of nonsale price change is roughly half of what it is including sales (9-12% per month versus 19-20% per month for identical items; 11-13% per month versus 21-22% per month including product substitutions). The median frequency of price change for finished-goods producer prices is comparable to that of consumer prices excluding sales. (2) One-third of nonsale price changes are price decreases. (3) The frequency of price increases covaries strongly with inflation, whereas the frequency of price decreases and the size of price increases and price decreases do not. (4) The frequency of price change is highly seasonal: it is highest in the first quarter and then declines. (5) We find no evidence of upwardsloping hazard functions of price changes for individual products. We show that the first, second, and third facts are consistent with a benchmark menu-cost model, whereas the fourth and fifth facts are not.
ELI table (Excel): Supplementary Material: More Facts About Prices Tables in Excel: Tables from Paper
Tables from Supplement (Excel): Press: The Economist (11/9/06), Handelsblatt (2/8/10)
Frequency of Price Change by ELI: ELI table (PDF)
(with Alice O. Nakamura and Leonard I. Nakamura)
Journal of Econometrics, 161(1), 47-55, March 2011.
AAbstract (click to expand): We use a large scanner price dataset to study grocery price dynamics. Previous analyses based on store scanner data emphasize differences in price dynamics across products. However, we also document large differences in price movements across different grocery store chains. A variance decomposition indicates that characteristics at the level of the chains (as opposed to individual stores) explain a large fraction of the total variation in price dynamics. Thus, retailer characteristics are found to be crucial determinants of heterogeneity in pricing dynamics, in addition to product characteristics. We empirically explore how the price dynamics we document affect price index measures.
(with Dawit Zerom)
Review of Economic Studies, 77(3), 1192-1230, July 2010.
AAbstract (click to expand): Recent theoretical work has suggested a number of potentially important factors in causing incomplete pass-through of exchange rates to prices, including markup adjustment, local costs and barriers to price adjustment. We empirically analyse the determinants of incomplete pass-through in the coffee industry. The observed pass-through in this industry replicates key features of pass-through documented in aggregate data: prices respond sluggishly and incompletely to changes in costs. We use microdata on sales and prices to uncover the role of markup adjustment, local costs and barriers to price adjustment in determining incomplete pass-through using a structural oligopoly model that nests all three potential factors. The implied pricing model explains the main dynamic features of short and long-run pass-through. Local costs reduce long-run pass-through (after six quarters) by 59% relative to a Constant Elasticity of Substitution benchmark. Markup adjustment reduces pass-through by an additional 33%, where the extent of markup adjustment depends on the estimated "super-elasticity" of demand. The estimated menu costs are small (0.23% of revenue) and have a negligible effect on long-run pass-through but are quantitatively successful in explaining the delayed response of prices to costs. We find that delayed pass-through in the coffee industry occurs almost entirely at the wholesale rather than the retail level.
Computational Appendix
Economic Inquiry, 47(4), 739-753, October 2009.
AAbstract (click to expand): The empirical success of Real Business Cycle (RBC) models is often judged by their ability to explain the behavior of a multitude of real macroeconomic variables using a single exogenous shock process. This paper shows that in a model with the same basic structure as the bare bones RBC model, monetary, cost-push or preference shocks are equally successful at explaining the behavior of macroeconomic variables. Thus, the empirical success of the RBC model with respect to standard RBC evaluation techniques arises from the basic form of the dynamic stochastic general equilibrium model, not from the specific role of the productivity shock.
Economics Letters, 99(1), 55-58, April 2008.
AAbstract (click to expand): This paper develops a simple model in which unemployment arises from a combination of selection and bad luck. During recessions, the proportion of workers who are laid off due to low productivity declines during recessions, diminishing the adverse signaling effect of an unemployment spell. Wage regressions estimated using the Displaced Workers Supplement support this basic prediction of the model.
(with David Bruns-Smith and Avi Feller)
Proceedings of the ACM Conference on Fairness, Accountability, and Transparency (FAccT), 2023.
AAbstract (click to expand): Household responses to income shocks are important drivers of financial fragility, the evolution of wealth inequality, and the effectiveness of fiscal and monetary policy. Traditional approaches to measuring the size and persistence of income shocks are based on restrictive econometric models that impose strong homogeneity across households and over time. In this paper, we propose a more flexible, machine learning framework for estimating income shocks that allows for variation across all observable features and time horizons. First, we propose non-parametric estimands for shocks and shock persistence. We then show how to estimate these quantities by using off-the-shelf supervised learning tools to approximate the conditional expectation of future income given present information. We solve this income prediction problem in a large Icelandic administrative dataset, and then use the estimated shocks to document several features of labor income risk in Iceland that are not captured by standard economic income models.
(with W. Erwin Diewert, Takanobu Nakajima, Alice O. Nakamura, and Masao Nakamura)
Canadian Journal of Economics, 44(2), 451-485, May 2011.
AAbstract (click to expand): There is policy interest in factoring productivity growth into technical progress and returns to scale components. Our approach uses exact index number methods to reduce the parameters that must be estimated, and allows us to exploit the cross-sectional dimension of plant-level panel data. We show that the same equation can also be used to estimate 'Harberger' scale economies and technical progress indicators that require fewer assumptions. Estimates of the elasticity of scale for Japanese establishments in three major industries over 1964-88 are presented. Our study spans the high growth era of the 1960s, two oil shocks, and other exogenous shocks.
(with Takanobu Nakajima, Alice O. Nakamura, and Masao Nakamura)
Empirica, 34(3), 247-271, May 2007.
AAbstract (click to expand): An important economic policy issue is to ascertain when and if technical change (TC) is driving measured growth in productivity. Was this the case for Japan during the late 1980s when a massive financial bubble was being formed? This paper addresses this question, after first further developing methods needed for this purpose. The movement of firms' TC is of particular policy interest to Japan whose economy has been suffering from a prolonged recession for more than a decade since the burst of the bubble in 1990. In the period of time immediately prior to the burst of the bubble, our estimation results show a significant drop in technical progress. What we believe these results reflect is that Japanese manufacturing firms made excessive investments in production inputs in the years when the bubble was being formed. This excessive investment in inputs did not contribute positively to TC and hence the measured productivity and economic growth of the bubble period in the late 1980s was unsustainable.
(with Ephraim Leibtag, Alice O. Nakamura, and Dawit Zerom)
USDA Economic Research Report No. (ERR-38), March 2007.
AAbstract (click to expand): A rich data set of coffee prices and costs was used to determine to what extent changes in commodity costs affect manufacturer and retail prices. On average, a 10-cent increase in the cost of a pound of green coffee beans in a given quarter results in a 2-cent increase in manufacturer and retail prices in that quarter. If a cost change persists for several quarters, it will be incorporated into manufacturer prices approximately cent-forcent with the commodity-cost change. Given the substantial fixed costs and markups involved in coffee manufacturing, this translates into about a 3-percent change in retail prices for a 10-percent change in commodity prices. We do not find robust evidence that coffee prices respond more to increases than to decreases in costs.
Economics Letters, 86(3), 373-378, March 2005.
AAbstract (click to expand): This paper evaluates the usefulness of neural networks for inflation forecasting. In a pseudo-out-of-sample forecasting experiment using recent U.S. data, neural networks outperform univariate autoregressive models on average for short horizons of one and two quarters. A simple specification of the neural network model and specialized estimation procedures from the neural networks literature appear to play significant roles in the success of the neural network model.
Unpublished Papers
Recent Lectures and Discussions
AEA-AFA Luncheon Speech, January 2025.
Webcast
Malim Harding Lecture, University of Toronto, October 2024.
Webcast
AFA Lecture at ASSA Meetings, January 2022.
by Stefano DellaVigna and Matthew Gentzkow. Discussion at NBER IO Meeting, February 2018.
Discussion prepared for 50th anniversary of Milton Friedman’s 1968 presidential address at the AEA Meetings, January 2018.
Discussion at BEAM conference, May 2017.
Popular Writing
(with Jón Steinsson and Nicolas Vincent)
Bloomberg View; June 12th 2012.
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