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Essays on Macroeconomics and Heterogeneous Agents

Lee, Young In
http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124756775921

Abstract Details

2024, Doctor of Philosophy, Ohio State University, Economics.
This dissertation consists of two chapters that examine macroeconomic implications of heterogeneous responses of the agents in the economy. The first chapter answers the following question: Will reduced wages of young households during a recession have lasting impacts on their house purchases along the housing ladder? Previous papers studied whether reduced asset prices could benefit young households during the Great Recession, but little attention has been paid to how their housing wealth accumulation process was affected. This paper complements the literature by adding a new channel of a housing ladder along which households upgrade or downgrade their housing quality among rental units, small owner-occupied houses, and big owner-occupied houses. I answer the question by developing a quantitative overlapping-generations model with heterogeneous households in age, liquid assets, housing status, and defaultable mortgages. The housing ladder affects the composition of housing types of different age groups in the dynamic analysis. Lower interest rates facilitate house purchases by offering cheaper mortgages during a recession. However, adversely impacted wage levels and financial constraints discourage young renters from purchasing small houses by causing congestion on the housing ladder. On the other hand, small house owners face lower returns on savings, wages, and home values that obstruct their housing upgrade, hence the supply of small houses. A fall in house prices has a general equilibrium effect that relaxes the financial constraints and provides easier access to homeownership, but the income effect from suppressed wages dominates. As a result, young households with little savings and scarred wages experience a continuously low homeownership rate after a recession compared to a counterfactual economy without a recession. The second chapter studies how government fiscal policies propagate through different structures of the input-output network in a two-sector production economy. I focus on two structural properties of the network: the number of channels of the network (complexity) and the existence of hub sectors (asymmetry). Hubs indicate sectors that do major activities in the economy on either demand or supply side. For example, I identify a sector as a supply hub when it supplies more than it demands from the other sectors. In the first quantitative exercise, I study whether considering investment hubs in the network has impact on the stabilizing ability of the government expenditure shocks. I consider three different scenarios depending on the number of channels of the network in the economy. I mainly find that the aggregate economy sees a more powerful shock propagation when the sectors are linked through both production and investment networks. In the second half of the quantitative implementation, I study stimulating which of the demanding hub or supplying hub maximizes the effect of the government expenditure shocks. I work with two sectors, examining two cases where Sector 1 is a supply hub, and where Sector 1 is a demand hub. Then I allocate government expenditure across sectors in three different ways and measure its stabilization effect on the aggregate GDP in each case. Lastly, I compare the results with those under a perfectly balanced economy without a hub. I conclude that the government expenditure should be directed to the supply hub when there exists both a demand hub and a supply hub.
Aubhik Khan (Advisor)
Julia Thomas (Committee Member)
Gabriel Mihalache (Committee Member)
126 p.
Economics
Macroeconomics, Heterogeneity, Housing Market, Housing Ladder

Recommended Citations

Citations

  • Lee, Y. I. (2024). Essays on Macroeconomics and Heterogeneous Agents [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124756775921

    APA Style (7th edition)

  • Lee, Young In. Essays on Macroeconomics and Heterogeneous Agents. 2024. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124756775921.

    MLA Style (8th edition)

  • Lee, Young In. "Essays on Macroeconomics and Heterogeneous Agents." Doctoral dissertation, Ohio State University, 2024. http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124756775921

    Chicago Manual of Style (17th edition)

osu1721124756775921
105
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This open access ETD is published by The Ohio State University and OhioLINK.