Shuhei Takahashi ワーキングペーパー一覧に戻る

  • The Optimum Quantity of Debt for Japan

    Abstract

    Japan's net government debt reached 130% of GDP in 2013. The present paper analyzes the welfare implications of the large debt for Japan. We use an Aiyagari (1994)-style heterogeneous-agent, incomplete-market model with idiosyncratic wage risk and endogenous labor supply. We find that under the utilitarian welfare measure, the optimal government debt for Japan is -50% of GDP and the current level of debt incurs the welfare cost that is 0.22% of consumption. Decomposing the welfare cost by the Flodén (2001) method reveals substantial welfare effects arising from changes in the level, inequality, and uncertainty. The level and inequality costs are 0.38% and 0.52% respectively, whereas the uncertainty benefit is 0.68%. Adjusting consumption taxes instead of the factor income taxes to balance the government budget substantially reduces the overall welfare cost.

    Introduction

    Japan's net government debt reached 130% of GDP in 2013 and the debt to GDP ratio is the highest among developed countries. A large number of papers, including Hoshi and Ito (2014), Imrohoroğlu, Kitao, and Yamada (2016), and Hansen and Imrohoroğlu (2016), analyze Japan's debt problem. However, the welfare effect of the large government debt has been less understood. Flodén (2001) finds that the optimal government debt for the United States is 150% of GDP. Is the optimal debt for Japan similar and hence should Japan accumulate more debt? Or does the current debt exceed the optimal level? How much is the welfare benefit of having the optimal level of debt instead of the current debt? 

  • The Effectiveness of Consumption Taxes and Transfers as Insurance against Idiosyncratic Risk

    Abstract

    We quantitatively evaluate the effectiveness of a consumption tax and transfer program as insurance against idiosyncratic earnings risk. Our framework is a heterogeneousagent, incomplete-market model with idiosyncratic wage risk and indivisible labor. The model is calibrated to the U.S. economy. We find a weak insurance effect of the transfer program. Extending the transfer system from the current scale raises consumption uncertainty, which increases aggregate savings and reduces the interest rate. Furthermore, consumption inequality shows a small decrease.

    Introduction

    Households face substantial idiosyncratic labor income risk, and private insurance against such risk is far from perfect. The presence of uninsurable idiosyncratic earnings risk implies a potential role of government policies. The present paper examines the effectiveness of a consumption tax and transfer system as insurance against idiosyncratic earnings risk in an Aiyagari (1994)-style model with endogenous labor supply. We find that the transfer program is ineffective in terms of risk sharing. Expanding the current transfer scheme in the United States increases consumption volatility and precautionary savings. Thus, aggregate savings increase and the interest rate falls.

  • Consumption Taxes and Divisibility of Labor under Incomplete Markets

    Abstract

    We analyze lump-sum transfers financed through consumption taxes in a heterogeneousagent model with uninsured idiosyncratic wage risk and endogenous labor supply. The model is calibrated to the U.S. economy. We find that consumption inequality and uncertainty decrease with transfers much more substantially under divisible than indivisible labor. Increasing transfers by raising the consumption tax rate from 5% to 35% decreases the consumption Gini by 0.04 under divisible labor, whereas it has almost no effect on the consumption Gini under indivisible labor. The divisibility of labor also affects the relationship among consumption-tax financed transfers, aggregate saving, and the wealth distribution.

    Introduction

    What is the effect of government transfers on inequality and risk sharing when households face labor income uncertainty? Previous studies, such as FlodÈn (2001) and Alonso-Ortiz and Rogerson (2010), find that increasing lump-sum transfers financed through labor and/or capital income taxes substantially decreases consumption inequality and uncertainty in a general equilibrium model with uninsured earnings risk. However, little is known about the impact of increasing consumption-tax financed transfers. Does it help people smooth consumption and does it reduce inequality? What is the impact on efficiency? The present paper analyzes these questions quantitatively.

  • State Dependency in Price and Wage Setting

    Abstract

    The frequency of nominal wage adjustments varies with macroeconomic conditions. Existing macroeconomic analyses exclude such state dependency in wage setting, assuming exogenous timing and constant frequency of wage adjustments under timedependent setting (e.g., Calvo- and Taylor-style setting). To investigate how state dependency in wage setting influences the transmission of monetary shocks, this paper develops a New Keynesian model in which the timing and frequency of wage changes are endogenously determined in the presence of fixed wage-setting costs. I find that state-dependent wage setting reduces the real impacts of monetary shocks compared to time-dependent setting. Further, with state dependency, monetary nonneutralities decrease with the elasticity of demand for differentiated labor, while the opposite holds under time-dependent setting. Next, this paper examines the empirical importance of state dependency in wage setting. To this end, I augment the model with habit formation, capital accumulation, capital adjustment costs, and variable capital utilization. When parameterized to reproduce the fluctuations in wage rigidity observed in the U.S. data, the statedependent wage-setting model shows a response to monetary shocks quite similar to that of the time-dependent counterpart. The result suggests that for the U.S. economy, state dependency in wage setting is largely irrelevant to the monetary transmission.

    Introduction

    The transmission of monetary disturbances has been an important issue in macroeconomics. Recent studies using a dynamic general equilibrium model, such as Huang and Liu (2002) and Christiano, Eichenbaum, and Evans (2005), show that nominal wage stickiness is one of the key factors in accounting for the monetary transmission. However, existing studies establish the importance of sticky wages under Calvo (1983)- and Taylor (1980)-style setting. Such time-dependent setting models are extreme in that because of the exogenous timing and constant frequency of wage setting, wage adjustments occur only through changes in the intensive margin. In contrast, there is evidence that the extensive margin also matters, i.e., evidence for state dependency in wage setting. For example, reviewing empirical studies on micro-level wage adjustments, Taylor (1999) concludes that "the frequency of wage setting increases with the average rate of inflation."Further, according to Daly, Hobijn, and Lucking (2012) and Daly and Hobijn (2014), the fraction of wages not changed for a year rises in recessions in the U.S.1 How does the impact of monetary shocks differ under state- and timedependent wage setting? Is state dependency in wage setting relevant for the U.S. monetary transmission?

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