The rise in U.S. wage inequality has caused substantial concern and debate. The presumption is that this has had sharply negative welfare consequences for US households, in particular for low skilled.
While macroeconomics generally abstracts from heterogeniety, studies of inequality often abstract from aggregate fluctuations.The purpose of this subproject is to explore how fluctuations in heterogeneity can have aggregate effects, and how these effects may influence asset prices and the cost of business cycles. A business cycle is basically defined in terms of periods of expansion or recession.
Many people make errors in their financial planning for retirement. This sub-project will revisit the design of pension reforms, and other welfare state policies, when human error and bounded rationality are taken into account. Bounded rationality is the idea that in decision-making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.
While China’s economic transition represents a “growth miracle,” the success is lump-sided: cross-sectional inequality is rising and the welfare of the majority of the population is not keeping pace with the high output growth. The rising inequality has caused a shift in policy makers’ attention from a singular focus on growth to a broader aim of promoting social welfare.
One of the most significant events in international economics over the last decades is the emergence of global imbalances, partly driven by China’s vast and growing foreign surplus.
China has – by any measure – had an impressive growth since the economic liberalization started around 1980. Urban wages are about ten times larger today than thirty years ago. However, the growth is not evenly distributed across different regions in China – it is the coastal regions which have grown.
Macroeconomics is scant on theories of government debt. Given this large recent public interest in government debt accumulation, there is a strong need for progress in this area.