Emanuela Cardia

The baby-boom and subsequent baby-bust have shaped much of the history of the second half of the 20th century; yet it is still largely unclear what caused them. This paper presents a new explanation of the fertility boom-bust that links the latter to the Great Depression and to the subsequent economic recovery. We show that the 1929 Crash attracted young married women 20 to 34 years old in 1930 (whom we name D-cohort) into the labor market, possibly via an added-worker effect. Using several years of Census micro data, we further document that the same cohort kept entering into the labor market in the 1940s and 1950s as economic conditions improved, thus decreasing wages and reducing work incentives for younger women. Its retirement in the late 1950s and in the 1960s instead freed positions and created employment opportunities. Finally, we show that the entry of the D-cohort is associated with increased births in the 1950s, while its retirement turned the fertility boom into a bust in the 1960s. The work behavior of this cohort explains a large share of the changes in both yearly births and completed fertility of all cohorts involved

Keywords: Baby Boom, Baby Bust, Great Depression, Added Worker Effect, Retirement, Fertility

Empirical evidence from vector autoregressions (VARs) showing that
public spending shocks crowd in private consumption has been seen as evidence
against standard neoclassical models of the business cycle. We show
that a standard real business cycle model in which all agents including the
government optimize is compatible with the results from the empirical literature.
A VAR estimated using artificial data simulated from the model indicates
that, under standard assumptions to identify public spending shocks,
an increase in public spending is associated with an increase in private consumption
and the real wage. The implied impulse responses are qualitatively
and quantitatively similar to those in the empirical literature.
JEL classification: E2, E3, H3
Keywords: Optimal public spending, Business cycles, Public spending shocks,
Crowding in


This paper construct a life-cycle model with home production and childcare constraints.
The parameters of the childcare production function are estimated using micro evidence from
U.S. time use data. We nd that the model reproduces well observed life-cycle patterns in
the time allocation across market, housework and childcare activities.

This paper studies the business cycle implications of sectoral heterogeneity in price rigidity using a highly disaggregated multi-sector model. The model is estimated by the Simulated Method of Moments using a mix of aggregate and sectoral U.S. data. The frequencies of price changes implied by our estimates are consistent with those reported in micro-based studies. We show that heterogeneity in price rigidity is the primary factor explaining the heterogeneity in the responses of sectoral output and inflation to a monetary policy shock. We also find that ignoring sectoral heterogeneity in price rigidity leads to the mismeasurement of the relative importance of aggregate and sector-specific shocks in aggregate and sectoral fluctuations.

WWII mobilization induced an increase in female labor supply, which persisted over time. Using Census micro data we study the qualitative aspects of this long term increase based on the occupations women held after the war. Almost three decades upon its end, we find that WWII had lasting effects on the occupational landscape. It entailed a significant shift towards “blue-collar” occupations, and in particular operatives and services, for women who were of working age during the war, and a decline in their likelihood of working in white-collar jobs and especially in the clerical sector. The effects spilled over to the next generation of women who were too young to be working at the time of the war. This cohort was instead more likely to be employed in clerical occupations, and less likely in lower-skill jobs. The lower educational attainment due to the draft, job experience and relatively higher wages in bluecollar sectors can largely account for the increased presence of the wartime Rosies in blue-collar jobs so long after the end of WWII.

Keywords: WWII, occupations, Rosie the Riveter, United States, manpower mobilization

JEL: N30, N42, J16, J24

*Other affiliations: CIREQ, CIRANO, IZA (Bellou) & CIREQ (Bellou and Cardia). Contact information

Women labor force participation increased dramatically between 1930 and 1960. Breaking with the past, a large share of women worked past their early 20s, and many kept working into their 50s. The cohort of women responsible for this new trend was born between the late 19th and the early 20th century and was of working age during the Great Depression. We show in this paper that their life-cycle labor pattern is linked to the Great Depression and to the large mortgage debt this cohort accumulated over the 1920s, during a period of rising housing prices. The sharp and prolonged decrease in employment and income together with a large price deflation, made the depression years particularly hard on debt and mortgage holders. These effects are strong and persistent and can explain their entry patterns into the 1950s.

Over the twentieth century, the allocation of womens’ time changed dramatically. This paper explores the implications for the allocation of married womens’ time stemming from:(1) the household revolution associated with the introduction of a variety of labor-saving devices in the home; (2) the remarkable increase in the relative wage of women; and (3) changes in childcare requirements associated with changes in fertility patterns. To do so, we construct a life-cycle model with home production and childcare constraints. The parameters of the childcare production function are estimated using micro evidence from U.S. time use data. We find that the increase in the relative wage of women is the most important explanation of the increase in married womens’ market work time over the twentieth century. Changes in fertility had large effects up to 1980, but little effect thereafter. The declining price of durables has an appreciable effect only since 1980, an effect that is consistent with a broader interpretation of durable goods reflecting the marketization of home production.

This paper uses 1940 and 1950 U.S. county Census data and IPUMS microdata to assess the impact of the rapid adoption of new household technologies such as the electric stove and refrigerators, on women’s labor participation rates. I show that: modern refrigerators significantly affected participation rates and that the results are stronger for women without children or older children, while did not affect single women. (JEL O11, J22).

This paper studies the business cycle implications of sectoral heterogeneity in price rigidity using a highly disaggregated multi-sector model. The model is estimated by the Simulated Method of Moments using a mix of aggregate and sectoral U.S. data. The frequencies of price changes implied by our estimates are consistent with those reported in micro-based studies. We show that heterogeneity in price rigidity is the primary factor explaining the heterogeneity in the responses of sectoral output and inflation to a monetary policy shock. We also find that ignoring sectoral heterogeneity in price rigidity leads to the mismeasurement of the relative importance of aggregate and sector-specific shocks in aggregate and sectoral fluctuations.

Barsky, House and Kimball (2007) show that introducing durable goods into a sticky-price model leads to negative sectoral comovement of production following a monetary policy shock and, under certain conditions, to aggregate neutrality. These results appear to undermine sticky-price models. In this paper, we show that these results are not robust to two prominent and realistic features of the data, namely input-output interactions and limited mobility of productive inputs. When extended to allow for both features, the sticky-price model with durable goods delivers implications in line with VAR evidence on the effects of monetary policy shocks.

This article constructs and estimates a sticky-price, Dynamic Stochastic General Equilibrium model with heterogeneous production sectors. Firms in different sectors vary in their price rigidity, production technology, and the combination of material and investment inputs. In particular, firms buy inputs from all sectors using the actual Input–Output Matrix and Capital Flow Table of the U.S. economy. By relaxing the standard assumption of symmetry, this model allows idiosyncratic sectoral dynamics in response to monetary policy shocks. The model is estimated by the Generalized Method of Moments using sectoral and aggregate U.S. time series.

This paper studies the persistent effects of monetary shocks on output.
Previous empirical literature documents this persistence, but standard general equilibrium models with sticky prices fail to generate output responses beyond the duration of nominal contracts. This paper constructs and estimates a general equilibrium model with price rigidities, habit formation, and costly capital adjustment. The model is estimated via Maximum Likelihood using US data on output, the real money stock, and the nominal interest rate. Econometric results suggest that habit formation and adjustment costs to capital play an important
role in explaining the output effects of monetary policy. In particular, impulse response analysis indicates that the model generates persistent, hump-shaped output responses to monetary shocks.

This paper uses a standard two-period overlapping generation model to examine the behavior of an economy where both intergenerational transfers of time and bequests are available. While bequests have been examined extensively, time transfers have received little or no attention in the literature. Assuming a log-linear utility function and a Cobb-Douglas production function, we derive an explicit solution for the dynamics and show that altruistic intergenerational time transfers can take place in presence of a binding non-negativity constraint on bequests. We also show that with either type of transfers capital is an increasing function of the intergenerational degree of altruism. However, while with time transfers the labor supply of the young increases with the degree of altruism, with bequests it may decrease.

Modern business cycle theory involves developing models that explain stylized facts. For this strategy to be successful, these facts should be well established. In this paper, we focus on the stylized facts of international business cycles. We use the generalized method of moments and quarterly data from twenty industrialized countries to estimate and test hypotheses concerning pairwise cross-country correlations of macroeconomic aggregates. A remarkable common feature emerges: these correlations are mostly positive, not very high and of a similar order of magnitude. The most important discrepancy with the theory is the low cross-country correlation of consumption.

This paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework. The long-term relations predicted by the model are derived and tested using Canadian data between 1966 and 1993. While the cointegrating predictions of the model without taxation are rejected, the ones of the model with labor taxation are not. Persistent labor tax rate increases appear to play an important role in the observed downward trend in hours worked.

Although intergenerational transfers of time in the form of grandparenting are substantial, little is known about their role and importance. In this paper, we calibrate an overlapping generations model extended to allow for both time and monetary transfers to the US economy. We use simulations to show that time transfers have important positive effects on labor supply and capital accumulation. We also find that subsidizing the time of the retired spent grandparenting is the most effective child care policy when time transfers are allowed, while subsidizing child care expenses is the most effective when time transfers are not. They both lead to higher levels of child care with positive effects on output and capital accumulation.

Multi-country models have not been very successful in replicating important features of the international transmission of business cycles. This paper extends previous work by introducing multiple sectors and traded intermediate inputs. Trade in intermediate goods represents approximately 60% of total trade and could significantly affect the main features of the international transmission of business cycles. In our model, imperfect substitution between domestic and foreign goods leads to cross-hauling in intermediate goods. As well, with more than a sector within each country there may be important inter-sectoral spillover effects that alter the transmission of shocks across countries. We show that these features of the model are important and can generate cross-correlations of output levels, employment and investment that are compatible with the data.

This paper explores the quantitative link between export-promoting commercial policies and economic growth. We build and calibrate a dynamic general equilibrium model of a small developing economy. The economy’s equilibrium is suboptimal due to monopolistic competition in the manufacturing sector and a human capital accumulation externality. Second-best commercial policy that promotes exports in the sector with the externality can lead to an increase in both welfare and growth rates. We show that export-promoting policies can lead to substantial quantitative increases in steady-state growth for a wide range of parameter values.

This paper replicates standard consumption function tests of Ricardian equivalence using series generated from a model which nests Ricardian equivalence within a non-Ricardian alternative (due to finite horizons and/or distortionary taxation). The author shows that the estimates of the effects of taxation on consumption are not robust and that standard tests may have weaknesses which can lead to conflicting results, whether Ricardian equivalence holds or not. The simulations also show that no clear conclusions about Ricardian equivalence can be drawn from observing a low correlation between the current account and government budget deficits.

Over the last thirty years, countries such as South Korea, Hong Kong, Taiwan and Singapore
have had sustained high growth rates and have undergone substantial economic
transformations. Lucas (1993), for instance, speaks of a miracle in the case of South Korea,
where between 1960 and 1988 yearly real per capita growth averaged 6.2%. This contrasts
with a world average of 1.8% over the same period. All four countries are also characterized
by their openness…

Nous analysons, calibrons et simulons un modèle des fluctuations économiques qui est très
général et qui permet de réunir plusieurs approches modernes à la modélisation du cycle
économique. Le modèle emboîte des hypothèses de croissance endogène, de concurrence
monopolistique sur le marché des biens et services, et de rigidités nominales par le biais de
contrats de salaire non contingents. Ceci nous permet de mettre en évidence les
hypothèses importantes de ces approches…

The paper characterizes the optimal time-consistent anti-inflation program in a
small, open, semi-industrialized economy when policy makers choose the rate of exchange
rate crawl, the rate of change of fiscal spending and a wage and price control parameter to
minimize deviations of output and inflation. The optimal program involves a rapidly
decelerating rate of crawl, a sharp reduction in spending, and a short initial period of wage
and price controls.

It has recently been shown that industrialized countries in the 1970s and 1980s are
characterized by a high correlation between national saving and investment. This regularly
is considered puzzling in the context of highly integrated international capital markets. In this
paper we show that both the failure of real interest parity and productivity changes are each
sufficient to generate a high positive correlation between national saving and investment.

This paper evaluates empirically the relative importance of monetary and fiscal versus technology shocks in an open economy characterized by perfect international capital mobility. The variance-covariance matrix of these shocks is estimated. A stochastic model is used to perform numerical simulations. The results show that persistent shocks to productivity can reproduce several empirical regularities (including the puzzling high correlation between national saving and investment) remarkably well and that monetary and fiscal shocks play a minor role.