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Theses Doctoral

Essays in Applied Macroeconomics

Hyun, Jungsik

This dissertation combines micro-level empirical analyses and general equilibrium structural models to study shock propagation mechanisms and business cycles dynamics, with a particular emphasis on the role played by firms. In the first chapter, we study how regional shocks spill over across U.S. local markets through intra-firm market networks and explore how such spillovers reshape household welfare across regions. We link data on barcode-region-level prices and quantities with producer-level information to exploit variation in firms' initial exposure to differential drops in local house prices in the 2007-09 recession. We show that a firm's local sales decrease in response to not only direct negative local demand shock but also indirect negative local demand shocks originating in its other markets. Intra-firm cross-market spillover effects arise mainly from product creation and destruction, whereas direct local shock operates through the sales of continuing products. Spillover effects occur because (i) firms replace products that have higher value---sales per product, unit price, and organic sales share---with lower-value ones in response to negative demand shocks, and (ii) such product replacements are synchronized across many markets within each firm. Counterfactual analysis using an estimated multi-region model with endogenous quality adjustments shows that our channel works as a novel inter-regional shock transmission mechanism and generates an implicit regional redistribution effect. Such effect is economically sizable and is comparable to the size of transfer policies implemented during the Great Recession.

In the second chapter, we investigate a role of supply chain network in transmitting housing market disruptions during the Great Recession. We build up a unique micro-level data that combines local housing market condition, firms' sales in each local market, and firm-level supply chain network information. Exploiting firm-specific demand shock stemming from cross-market variation in house price changes and an initial difference in firms' local sales, we find that such shock not only affects downstream firms but also transmits to their suppliers. The estimated supplier-level elasticity is quantitatively large, reflecting larger role of downstream firms with higher elasticity in the network structure. To quantify such propagation at the aggregate level, we build up a parsimonious network model calibrated to match the micro-level data. Our counterfactual analysis shows that approximately 18\% of the observed drop in the aggregate output can be attributed to the propagating role of the supply chain network.

In the third chapter, we study the business cycle with a Translog production function. We empirically identify a complementarity between labor and energy that leads to procyclical returns to scale, which is not compatible with the tightly parameterized production function commonly used in the literature (Cobb-Douglas and CES). Therefore, we propose a flexible Translog production function that not only features complementarity-induced procyclical returns to scale but is also consistent with a balanced growth path. A simple calibrated business cycle model with the proposed production function generates strikingly data-consistent dynamics following demand shocks without relying on either nominal rigidities or countercyclical markups.

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More About This Work

Academic Units
Economics
Thesis Advisors
Uribe, Martin
Degree
Ph.D., Columbia University
Published Here
May 15, 2020