The Redistribution Recession

Professor of Economics, University of Chicago, author of Parental Priorities and Economic Inequality, weekly contributor to Economix blog for the New York Times

Preface ; Chapter 1 Introduction ; Chapter 2 The Rise of Labor Productivity ; Quarterly Indicators of Aggregate Economic Quantities ; Movements Along an Aggregate Marginal Productivity Schedule ; On Average, Real Wages did not Fall ; Was It Customer Demand? Factor Reduction and Factor Substitution by Industry ; Neither Wealth Effects nor Intertemporal Substitution Effects Explain the <"Supply>" Shift ; Labor Market Distortions since 2007 ; Conclusion: Productivity Patterns Begin to Reveal the Recession's Causes ; Appendix 2.1: Productivity, Labor, and Residuals in Prior Downturns ; Appendix 2.2: Sensitivity Analysis ; Chapter 3 The Expanding Social Safety Net ; A Framework for Quantifying the Generosity of the Safety Net as a Whole ; Legislation Made the Safety Net Available to Millions More ; Legislation Increased the Amount of Benefits Received per Program Participant ; Most of the Increase in Government Safety Net Expenditure is the Direct Result of Program Rule Changes ; Safety Net Rule Changes and Assistance for the Unemployed ; Means-tested Loan Forgiveness ; Conclusion: Replacement Rates for Aggregate Analysis ; Appendix 3.1: Calculation and Aggregation of Statutory Eligibility and Benefit Indices ; Appendix 3.2: Sensitivity Analysis ; Appendix 3.3: The Self-Reliance Rate Outlook ; Appendix 3.4: The Making Work Pay Tax Credit ; Chapter 4 Supply and Demand: Labor Market Consequences of Safety Net Expansions ; The Income-Maximization Fallacy ; Labor and Output Effects of Safety Net Expansions ; Predictions for Consumption and Investment ; Calibrating the Wage Elasticity of Aggregate Labor Supply ; Conclusions and Interpretation ; Appendix 4.1: Comparative Advantage with Heterogeneous Effects of the Safety Net Expansions ; Appendix 4.2: Calibrating the Supply Elasticity from Unemployment Duration Studies ; Appendix 4.3: Safety Net Distortions Measured in Dollars per Year ; Chapter 5 Means-Tested Subsidies and Economic Dynamics since 2007 ; The Neoclassical Growth Model with Targeted Means-Tested Subsidies ; Data and Simulation Results ; Effects of the Safety Net Expansion ; Interpreting the Residual Labor Market Distortions ; An Investment Distortion by Itself does not Fit Actual Behavior ; Conclusions ; Appendix 5.1: Calibration, Simulation, and Additional Sensitivity Analysis ; Chapter 6 Cross-Sectional Patterns of Employment and Hours Changes ; Cross-sectional Patterns of Self-Reliance Rate Changes ; Work Hours Changes by Demographic Group and Region ; Program Participation Changes by Demographic Group ; Conclusion: The Cross-Sectional Patterns of Employment and Hours Changes are as Expected from a Large Safety Net Expansion ; Appendix: Summary Statistics and Additional Results ; Chapter 7 Keynesian and Other Models of Safety Net Stimulus ; The Safety Net and Consumer Spending ; Transfers and Government Purchases are not the Same ; Labor Market Slack and the Marginal Effects of Supply ; Sticky Prices, the Wage Elasticity of Labor Demand, and the Zero Lower Bound ; An Econometric Model that Nests My Approach with the Slack Market and Sticky Price Hypotheses ; Conclusion: Whether Labor Supply Matters More, or Less, during a Recession is an Empirical Question ; Appendix: The Safety Net, Sticky Prices, and Monetary Policy ; Chapter 8 Recession-Era Effects of Factor Supply and Demand: Evidence from the Seasonal Cycle, the Construction Market, and Minimum Wage Hikes ; The Christmas and the Academic Seasons as Demand and Supply Shifts ; Christmas Demand in Recessions and Booms ; The Summer Seasonal for Employment and Unemployment ; Housing Investment Crowds Out Non-Residential Construction ; The Employment Effects of Recent Minimum Wage Hikes Were No Less than Before ; The Federal Minimum Wage Hikes Likely Reduced National Employment by Hundreds of Thousands, Especially Among the Young and Unskilled ; Conclusion: Labor Supply Still Matters, About as Much as It Did in the Past ; Chapter 9 Incentives and Compliance under the Federal Mortgage Modification Guidelines ; The Budget Set of a Borrower Facing the FDIC-HAMP Modification Guidelines ; Borrower Reactions under Full Information and Full Compliance: Spend More and Work Less ; Lender Incentives to Expand Modification Capacity ; Conclusions ; Appendix 9.1: Principal Modifications and the Eligible Income Range ; Appendix 9.2: Marginal Tax Rates with Various Horizons and Discount Rates ; Chapter 10 Uncertainty, Redistribution, and the Labor Market ; A Model of the Equity-Efficiency Tradeoff ; Possible Changes in the Equity-Efficiency Tradeoff, and the Optimal Degree of Social Insurance ; The Cost-Benefit Analysis of Safety Net Expansions: Necessary Ingredients ; Conclusions ; Chapter 11 Conclusions ; Incentives Matter ; Was the Financial Collapse a Cause, or Effect? ; Labor Supply and Demand Help Explain an Unhappy Situation ; Bibliography