Essays in macroeconomics and international economics.

Abstract

The dissertation consists of three distinct chapters that contribute to important, yet unresolved topics in Macroeconomics and International Economics. Macroeconomists have been puzzled by the lack of a downward trend in per capita labor hours. The first chapter provides an explanation to the puzzle based on improvements in the quality of jobs over time. Through regressions analyses using data from the Michigan Health and Retirement Study, the chapter documents the response of work hours to improvements in the nature of jobs. An estimation of the aggregate job quality index suggests that improvements in jobs accounted for at least 20.4 percent of labor hours growth between 1850 and 2000 in the United States. A general equilibrium analysis suggests that the improvement in job quality also caused 20.4 percent growth in consumption, capital, investment, and output over the same period. Economists and policymakers have also been interested in response of consumption to predictable income changes. The second chapter re-examines the issue in a context that circumvents several shortcomings in previous studies. The maturity date of a mortgage loan marks the end of mortgage payments for homeowners. Following the last payment, homeowners experience an increase in their discretionary income. The study interprets this event as an anticipated increase in income, and analyzes consumption behavior over the transition period using regression analysis. The results indicate that households do not increase nondurable goods consumption despite the increase in disposable income. Instead, they increase savings and expenditures on some durable goods. The third chapter studies the adverse effects of economic disintegration by focusing on the 1985--1993 South African economic embargo. Aggregate economic data show a substantial increase in the cost of capital during the embargo. The increase in the cost of capital coincided with a substantial decrease in the growth rates of capital, investment, output and consumption. Results from a neoclassical growth model calibrated to the South Africa economy indicate that output growth declined by 0.24 percent and per capita output was on average 1.18 percent lower as a result of the financial autarky. Estimates of the associated welfare loss stand at around 1 percent of consumption.