Welfare and Output with Income Effects and Taste Shocks

主讲人：David Baqaee (UCLA)

时间：2021年11月11日 上午10:00 – 11:30

加入Zoom会议：

https://zoom.us/j/93102490110?pwd=U3N6c3dPWTFmYkl1STMrcVVKMDUxUT09

会议号：931 0249 0110

密码：122368

摘要：We characterize how welfare responds to changes in budget sets and technologies when preferences are non-homothetic or subject to shocks, in both partial and general equilibrium. We generalize Hulten’s theorem, the basis for constructing aggregate quantity indices, to this context. We show that calculating the response of welfare to a shock only requires knowledge of expenditure shares and elasticities of substitution and (given these elasticities) not of income elasticities and taste shocks. We also characterize the gap between welfare and chain-weighted indices. We apply our results to long- and short-run phenomena. In the long-run, we show that if structural transformation is caused by income effects or changes in tastes, rather than substitution effects, then Baumol’s cost disease is twice as important for welfare. In the short-run, we show that standard deflators understate welfare-relevant inflation because product-level demand shocks are positively correlated with price changes. Finally, using the Covid-19 recession we illustrate the differences between partial and general equilibrium notions of welfare, and show that real consumption and real GDP are unreliable metrics for measuring welfare or production.

主讲人简介：David Baqaee is an Assistant Professor of Economics at UCLA, a research affiliate of the CEPR, and a Faculty Research Fellow at the NBER. His academic interests are on aggregate productivity and aggregation, network economics and macroeconomics of industrial organization. His work has been published in leading journals, including the American Economic Review, Quarterly Journal of Economics, Econometrica, Journal of the European Economic Association and Journal of Monetary Economics.