Seminario "Sufficient Statistics for Measuring Forward-Looking Welfare"
Miércoles 14/8, 17.15h
Presentado por Ariel Burstein
Abstract
We provide a method to measure welfare in money-metric terms, accounting for future expectations. Our approach relies on two key assumptions: (1) separability of the expenditure function between present and future, and (2) existence of households without idiosyncratic undiversifiable risk. We infer expectations about the future from observed consumption-savings choices of this subset of households. Our sufficient statistics methodology accommodates incomplete markets, lifecycle motives, non-rational expectations, non-exponential time discounting, and arbitrary functional forms. Application requires estimates of the intertemporal substitution elasticity, price changes over time, and repeated cross-sectional data on household income, balance sheets, and expenditures. Using PSID data from the United States, we find that static measures overstate cost-of-living increases, especially for younger and poorer households. Our estimates can be used to study the welfare consequences of dynamic stochastic shocks that affect households along different margins and time horizons.
*Jointly written with David R. Baqaee and Yasutaka Koike-Mori
Ariel Burstein
Ph.D. in Economics, Northwestern University.
Professor of Economics, UCLA. His research focuses on trade and international macroeconomics. Recent projects study the impact of trade on the college wage premium and on firms incentives to innovate, and the impact of immigration on labor market outcomes. His work has been published in the American Economic Review, the Journal of Political Economy and the Quarterly Journal of Economics. He has served as Co-Editor at the Journal of International Economics and Associate Editor at the American Economic Review, the Journal of Economic Theory and the Review of Economic Dynamics.
We provide a method to measure welfare in money-metric terms, accounting for future expectations. Our approach relies on two key assumptions: (1) separability of the expenditure function between present and future, and (2) existence of households without idiosyncratic undiversifiable risk. We infer expectations about the future from observed consumption-savings choices of this subset of households. Our sufficient statistics methodology accommodates incomplete markets, lifecycle motives, non-rational expectations, non-exponential time discounting, and arbitrary functional forms. Application requires estimates of the intertemporal substitution elasticity, price changes over time, and repeated cross-sectional data on household income, balance sheets, and expenditures. Using PSID data from the United States, we find that static measures overstate cost-of-living increases, especially for younger and poorer households. Our estimates can be used to study the welfare consequences of dynamic stochastic shocks that affect households along different margins and time horizons.
*Jointly written with David R. Baqaee and Yasutaka Koike-Mori
Ariel Burstein
Ph.D. in Economics, Northwestern University.
Professor of Economics, UCLA. His research focuses on trade and international macroeconomics. Recent projects study the impact of trade on the college wage premium and on firms incentives to innovate, and the impact of immigration on labor market outcomes. His work has been published in the American Economic Review, the Journal of Political Economy and the Quarterly Journal of Economics. He has served as Co-Editor at the Journal of International Economics and Associate Editor at the American Economic Review, the Journal of Economic Theory and the Review of Economic Dynamics.