Essays in macroeconomics : confidence, business cycles, and fertility
Title: Essays in macroeconomics : confidence, business cycles, and fertility
Author: LAGERBORG, Andresa
Citation: Florence : European University Institute, 2018
Series/Number: EUI PhD theses; Department of Economics
This thesis comprises essays in macroeconomics across two main themes. The first studies the role of confidence shocks as a source of business cycle fluctuations using an instrumental variable approach. Exogenous drops in consumer confidence are identified by using school and mass shootings in the U.S. as natural experiments. Such autonomous drops in confidence are, in turn, found to sizably and persistently depress consumption and economic activity, raise prices, and reduce nominal interest rates. These empirical findings are shown to be consistent with a model in which negative confidence shocks reduce expectations of future technology, prompting consumers to save for wealth and precautionary motives, firms to reduce employment and investment while raising prices, and monetary authorities to reduce short-term nominal interest rates. These findings provide empirical evidence of a causal role of confidence in producing macroeconomic fluctuations. The second theme studies household fertility decisions in relation to business cycles and underlying labor market institutions. Fertility in the U.S. is shown to be procyclical with respect to current economic conditions (negative unemployment shocks) and rise in response to consumer expectation and stock price news shocks - representing expected wealth effects anticipated by households. However, fertility is shown to be countercyclical with respect to highly transitory TFP shocks – such that couples choose to have children during recessions when the opportunity cost (forgone wages) is lower, i.e. the income effect outweighs the substitution effect. Moreover, labor market institutions not directly targeting fertility are found to affect average fertility rates through their impact on business cycles. Fertility rates are negatively associated with wage rigidities (which raise employment volatility) and positively associated with employment rigidities (which instead raise wage volatility).
Table of Contents:
--1. Confidence and Local Activity: An IV Approach --2. Does Economic Security Really Impact on Gun Violence at U.S. Schools? --3. Sentimental Business Cycles --4. Do Stock Market Booms Anticipate Baby Booms? --5. Do Labor Market Institutions Matter for Fertility?
Defence date: 5 June 2018; Examining Board: Prof. Evi Pappa, EUI, Supervisor ; Prof. Juan Dolado, EUI ; Prof. Gianluca Benigno, LSE and IMF ; Prof. Vanghelis Vassilatos, Athens University of Economics and Business (AUEB); The thesis is awarded Vilfredo Pareto Prize for the Best Thesis in Economics 2018
Type of Access: openAccess
Version: Chapter 5 of the thesis, co-authored with CAMILLI, Andrea, was previously published as EUI ECO WP 2017/07. Chapter 2 of the thesis 'Does economic security really impact on gun violence at U.S. schools?' by PAPPA, Evi, LAGERBORG, Andresa and RAVN, Morten O. draws upon the article 'Does economic insecurity really impact on gun violence at US schools?' published in Nature human behaviour, 2018.