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Open Access Publications from the University of California

Essays in Macroeconomics and Trade

  • Author(s): Yatsynovich, Yury
  • Advisor(s): Gorodnichenko, Yuriy
  • Rodriguez-Clare, Andres
  • et al.

In the current thesis I investigate the impact of sectoral structure of the economy on some aspects of its short-run fluctuations and long-run trends.

In the first chapter -- "Cost Structure and Price Rigidity across Sectors" -- I model a mechanism through which the structure of costs of producers can affect producers' decisions on the frequency of adjusting prices. First, I establish an empirical observation that sectors which are characterized by either a higher share of labor or more diversified structure of bundles of intermediate goods are characterized by more rigid prices. Then I build and solve a partial equilibrium model that describes optimal price-setting strategies of firms in different sectors. The model provides an explanation for heterogeneity in price rigidity across different sectors. The calibrated model can be used for predicting how changes in the production processes and in the structure of costs can affect the heterogeneity of price rigidity across sectors and, hence, the aggregate price rigidity in the economy.

In the second chapter -- "Technological Spillovers and Dynamics of Comparative Advantage" -- I investigate the question of the evolution of sector productivity and comparative advantage under the presence of cross-sector technological spillovers. For that I develop a dynamic model of international trade with cross-sector spillovers. In addition to the standard effect of comparative advantage on labor allocation, the model accounts for the effects of labor allocation on the sector productivity and comparative advantage. The core mechanism is a combination of an idea-generating process within each sector and technological spillovers across sectors. I establish necessary and sufficient conditions for the existence and uniqueness of a balanced growth path and describe the conditions under which a welfare-improving industrial policy is possible. I calibrate the model using the US patent data to parametrize the strength of technological spillovers and use the model to describe the optimal industrial policy.

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