Heterogeneity and Aggregation: Implications for Labor-Market Fluctuations: Reply
American Economic Review
vol. 104,
no. 4, April 2014
(pp. 1461-66)
Abstract
Takahashi (2014) has uncovered coding errors in our paper, Chang and Kim (2007)-henceforth, CK. We acknowledge and are embarrassed by these mistakes. We are grateful to Takahashi for uncovering them. While the correction decreases the volatility of the labor market wedge, we find that the main message of CK remains valid: the measured labor market wedge arises endogenously in an economy with incomplete capital markets and indivisible labor supply. For example, our model accounts for 18 percent of the volatility in the labor market wedge in the data; it was 43 percent in CK.Citation
Chang, Yongsung, and Sun-Bin Kim. 2014. "Heterogeneity and Aggregation: Implications for Labor-Market Fluctuations: Reply." American Economic Review, 104 (4): 1461-66. DOI: 10.1257/aer.104.4.1461Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- E32 Business Fluctuations; Cycles
- J22 Time Allocation and Labor Supply
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials