John Jones' Research Papers
Skill-Biased Technical Change and the
Cost of Higher Education (with Annie Yang)
Slides
October, 2012
Abstract.
We document the growth in higher education costs and tuition over the past 50 years.
To explain these trends, we develop a general equilibrium model with skill- and
sector-biased technical change. We assume that higher education suffers from Baumol's
(1967) service sector disease, in that the quantity of labor and capital needed to
educate a student is constant over time. Finding the model's parameters through a
combination of calibration and estimation, we show that it can explain the rise in
college costs between 1961 and 2009, along with the increase in college attainment
and the increase in the relative earnings of college graduates. We finish by using
the model to perform a number of numerical experiments.
Public Pensions and Labor Supply Over the Life Cycle (with Eric French)
Federal Reserve Bank of Chicago Working Paper WP 2010-09
International Tax and Public Finance 19(2) (April 2012)
Abstract.
In this paper we discuss how labor supply elasticities vary over the life cycle. We conclude that
the labor supply of older workers is responsive to changes in retirement incentives. The evidence
suggests that recent public pension reforms are leading older individuals in many developed countries
to increase their labor supply.
The Effects of Health Insurance
and Self-Insurance on Retirement Behavior (with Eric French)
Supplemental Appendices
Replication Materials: First Stage, Second Stage
Michigan Retirement Research Center Working Paper 2007-170 (earlier draft)
Center for Retirement Research Working Paper 2004-12 (even earlier draft)
Slides
Econometrica 79(3) (May, 2011)
Abstract.
This paper provides an empirical analysis of the effects of employer-provided health insurance,
Medicare, and Social Security on retirement behavior. Using data from the Health and Retirement
Study, we estimate a dynamic programming model of retirement that accounts for both saving and
uncertain medical expenses. Our results suggest that Medicare is important for understanding
retirement behavior, and that uncertainty and saving are both important for understanding the
labor supply responses to Medicare. Half the value placed by a typical worker on his
employer-provided health insurance is the value of reduced medical expense risk. Raising the
Medicare eligibility age from 65 to 67 leads individuals to work an additional 0.074 years over
ages 60-69. In comparison, eliminating two years worth of Social Security benefits increases
years of work by 0.076 years.
Why do the Elderly Save? The Role of Medical Expenses
(with Cristina De Nardi and Eric French)
NBER Working Paper 15149 (earlier draft)
Previously circulated as Differential Mortality, Uncertain
Medical Expenses, and the Saving of Elderly Singles (NBER Working Paper 12554)
Journal of Political Economy 118(1) (February, 2010)
Abstract. This paper constructs a model of saving for retired single people
that includes heterogeneity in medical expenses and life
expectancies, and bequest motives. We estimate the model using
AHEAD data and the method of simulated moments. Out-of-pocket
medical expenses rise quickly with age and permanent income. The
risk of living long and requiring expensive medical care is a key
driver of saving for many higher income elderly. Social insurance
programs such as Medicaid rationalize the low asset holdings of
the poorest, but also benefit the rich, by insuring them against
high medical expenses at the ends of their lives.
Transition Accounting
for India in a Multi-sector Dynamic General Equilibrium Model
(with Sohini Sahu)
SUNY-Albany Discussion
Paper 08-03
July, 2009
Abstract.
Using a quantitative methodology designed specifically for emerging
economies, we measure the components of India's economic growth over
the period 1960-2005. Our approach accounts for time-varying parameters,
transitional dynamics and non-linear trends. We find that increased
productivity in the service sector, facilitated by a structural shift
toward services, is the principal driver of India's economic growth.
Our measures also suggest that the allocation of inputs across sectors
has not improved over this period, and in the case of labor appears to
have significantly worsened. We further find that fluctuations in
output around its trend are due primarily to fluctuations in
sector-specific total factor productivity, with fluctuations in labor
market distortions and labor taxes also playing important roles. In
the period 1960-1980, productivity fluctuations in the agricultural
sector are the dominant source of cycles. Since then, productivity
fluctuations in the manufacturing and service sectors have been more
important.
Life Expectancy and Old Age Savings
(with Cristina De Nardi and Eric French)
NBER Working Paper 14653 (earlier draft)
American Economic Review, Papers & Proceedings, 99(2) (May, 2009)
Abstract.
Rich people, women, and healthy people live longer. We document
that this heterogeneity in life expectancy is large, and we use an
estimated structural model to assess its effect on the elderly's
saving. We find that the differences in life expectancy related to
observable factors such as income, gender, and health have large
effects on savings, and that these factors contribute by similar
amounts. We also show that the risk of outliving one's expected
lifespan has a large effect on the elderly's saving behavior.
Financial Liberalization and Banking
Crises in Emerging Economies (with Betty C. Daniel)
Extended Background Version
Journal of International Economics 72(1) (May, 2007)
Abstract. Financial liberalization often leads to financial
crises. This link has usually been attributed to poorly designed banking
systems, an explanation that is largely static. In this paper we develop a
dynamic explanation, by modelling how a newly-liberalized bank's opportunities
and incentives to take on risk develop over time. The model reveals that even
if a banking system is well-designed, in the sense of having good long-run
properties, many countries will enjoy an initial period of rapid, low-risk
growth and then enter a period with an elevated risk of banking crisis. This
transition emerges because of the way in which the degree of foreign
competition, the marginal product of capital, and the bank's own net worth
simultaneously evolve.
Optimal Investment with Lumpy Costs
(with Duc T. Le)
SUNY-Albany Discussion
Paper 02-02
Journal of Economic Dynamics and Control 29(7) (July, 2005)
Abstract. In this paper we analyze a continuous-time model of
investment with uncertainty, irreversibility and a broad class of lumpy
adjustment costs. We show that the two components of the optimal investment
strategy, the investment trigger and the investment increment, can be found
sequentially, and that the optimal investment increment maximizes a closed
form function. Solving the model numerically, we find that adding a relatively
small amount of variable adjustment costs often leads firms to invest in much
smaller increments. We derive a measure of user cost that incorporates lumpy
investment, and use it to show that as firms invest in bigger increments, the
investment trigger increases as well.
On the Distribution and Dynamics of Health Care Costs (with Eric French)
Detailed Background Version
Journal of Applied Econometrics 19(4) (Special Issue on the
Econometrics of Social Insurance, 2004)
Abstract. Using data from the Health and Retirement Survey and
the Assets and Health Dynamics of the Oldest Old survey, we estimate the
stochastic process that determines both the distribution and dynamics of
health care costs. We find that the data generating process for log health
costs is well represented as the sum of a white noise process and a highly
persistent AR(1) process. We also find that the innovations
to this process can be modelled with a normal distribution that has been
adjusted to capture the risk of catastrophic health care costs. Simulating
this model, we find that in any given year 0.1% of households receive a
health cost shock with a present value of at least $125,000.
The Dynamic Effects of Firm-level Borrowing Constraints
Background
Journal of Money, Credit and Banking 35(5) (October,
2003)
Abstract. In this paper I develop a detailed dynamic model
of firm behavior in order to see whether financial constraints and endogenous
exit are important propagation mechanisms. To do this, I construct
an economy where firms face financial constraints, fixed costs and persistent
idiosyncratic shocks. Using numerical methods, I analyze how a large collection
of these firms responds to aggregate productivity shocks. A common
result is that financial constraints tend to dampen the economy's initial
response to aggregate productivity shocks, but that equity accumulation
and exit dynamics amplify the longer-term response. The relative sizes
of these two effects, however, are sensitive to firms' environments.
Finite Mixture Distributions, Sequential Likelihood and the EM Algorithm (with Peter Arcidiacono)
Econometrica 71(3) (May, 2003)
Abstract. A popular way to account for unobserved heterogeneity
is to assume that the data are drawn from a finite mixture distribution.
A barrier to using finite mixture models is that parameters that could
previously be estimated in stages must now be estimated jointly: using
mixture distributions destroys any additive separability of the log-likelihood
function. We show, however, that an extension of the EM algorithm reintroduces
additive separability, thus allowing one to estimate parameters sequentially
during each maximization step. In establishing this result, we develop
a broad class of estimators for mixture models. Returning to the likelihood
problem, we show that, relative to full information maximum likelihood,
our sequential estimator can generate large computational savings with
little loss of efficiency.
Has Fiscal Policy Helped Stabilize
the Postwar U.S. Economy?
Journal of Monetary Economics 49(4) (May, 2002)
Abstract. In this paper, I consider whether postwar fiscal
policy has helped stabilize the U.S. economy. I do this by adding to the
stochastic growth model fiscal policy feedback rules estimated from postwar
data. These rules allow fiscal policies to respond to current and lagged
output and labor hours. I use the estimated policy rules to see if postwar
fiscal policy reduces output volatility and/or lengthens expansions and
shortens recessions. I find that fiscal policy in general provides little
stability on either count. I also find that the endogenous feedback rules,
by themselves, are at best moderately stabilizing and are in some cases
destabilizing.
Multiple Equilibria and Endogenous Persistence in a Dynamic
Model of Employment
SUNY-Albany Discussion
Paper 04-02
July, 1998
Abstract. In this paper, I consider whether: (1)
a dynamic forward-looking model with multiple equilibria can generate persistent
fluctuations without persistent sunspots; and (2) indeterminacy is important
for these persistent fluctuations. The answer to the first question
is a tentative no. The answer to the second question is yes. Extending
the approach of Howitt and McAfee (1988, 1992), I work with a dynamic model
of long-term employment. In this framework, search externalities
allow both hiring and not hiring to comprise symmetric Nash equilibria
for some values of the i.i.d. hiring cost. Following Cooper (1994),
firms implement the hiring strategy of the previous period unless the realized
hiring cost makes a change in strategy the dominant strategy. Calibrating
the model, I find that with plausible functional forms, the selection rule
can lead to persistent economic episodes only if one uses counterfactual
parameters. Turning to the second question, I estimate that the economy
has multiple equilibria, in the sense that the current hiring decision
depends on the previous hiring decision, around 41 percent of the time.
Moreover, I find that without some indeterminacy, the model can not generate
expansions and recessions that are both persistent.
Slides
Last Updated on September 14, 2012 by John
Jones