Collaborative Research: The Dynamics of the Capital and Labor Allocation in the United States

Regents Of The University Of Michigan - Ann Arbor, Ann Arbor MI

Investigators

Abstract

This research project measures how capital, labor, and other inputs are allocated across manufacturing firms and establishments by size, age, and other characteristics. They will use data from the Department of Treasury and the U.S. Census Bureau to calculate statistics that describe how these resources have been allocated across U.S. manufacturing firms, and how that allocation has changed over time. The new measurements will be publicly available and will be used in models of the U.S. economy. The team also plans to use a business cycle accounting procedure to assess whether (and to what degree) changes in resource allocation help to create business cycle fluctuations. Finally, they will identify a set of economic frictions that are important for understanding business cycles. A large class of macroeconomic models starts with the behavior of individual firms, aggregates firms into industries, and then builds up to the production side of the entire US economy. The result of this project will be widely incorporated into these macroeconomic models. As a result we will better understand how government economic policies affect different industries and firms in different ways. The team seeks to understand the role of frictions to resource allocation in shaping business cycle fluctuations. They will provide a publicly available set of reduced-form statistics that describe the dynamics of the allocation using high-quality Census micro data. Second, they will develop a semi-structural distributional business cycle accounting procedure to assess the contribution of changes in the allocation to aggregate fluctuations. Third, they will use the results of this procedure to identify the set of structural frictions that are quantitatively relevant for understanding aggregate fluctuations. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.