Joseph Zeira's research while affiliated with Hebrew University of Jerusalem and other places

Publications (46)

Article
Recently, Penn World Tables include new data that enable calculation of total factor productivity in addition to output for a large set of countries. We use these new data to examine convergence and divergence across countries by applying a new approach, which differentiates between the dynamics of output and of productivity. Our empirical results...
Article
Full-text available
This paper shows that different labor market policies can lead to differences in technology across sectors in a model of labor saving technologies. Labor market regulations reduce the skill premium and as a result, if technologies are labor saving, countries with more stringent labor regulation, which bind more for low skilled workers, become less...
Chapter
Every discussion on income distribution and inequality distinguishes between market income, namely income before tax and without transfers, and disposable, or net income, which is after tax and including transfers. Hence, taxation and transfers create a redistribution of income. This redistribution is usually progressive, as direct taxes and subsid...
Article
estudios/dtbc. Existe la posibilidad de solicitar una copia impresa con un costo de $500 si es dentro de Chile y US$12 si es para fuera de Chile. Las solicitudes se pueden hacer por fax: (56-2) 6702231 o a través de correo electrónico: bcch@bcentral.cl.studies/workingpaper. Printed versions can be ordered individually for US$12 per copy (for orders...
Article
This paper analyzes the effect of trade on growth, when technology adoption is endogenous and depends on factor prices. It shows that trade can lead to an increase in income disparities across countries, as the rich countries grow much faster than the poor countries. This is due to specialization of richer countries in skilled goods, which experien...
Article
This paper presents a model of innovations and endogenous economic growth with two main assumptions: first, the cost of searching for innovations differs across innovations, and second, innovations take time to find. The paper shows that given these two assumptions together, competition leads to patent races and to duplication of innovative activit...
Article
Whenever a country specializes on industries that use female labor intensively, its female labor force participation should increase. This intuition, which bases on the Stolper-Samuleson Theorem, may fail in a three-factor, two-good model. We develop a model where capital, male and female work are distinct factors of production. We follow an establ...
Article
This paper suggests an additional channel through which education affects economic growth. If growth is driven by industrialization of production, where machines replace labor in a growing number of tasks, then operating these machines requires workers who are educated, namely literate and know arithmetic, whose human capital is less specific and m...
Article
This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises. It establishes a link between the equity capital of the corporate sector and the risk-free interest rate. When equity capital falls, the risk-free interest rate declines because bonds become riskier and investors seek safer assets. If the fall in...
Article
This paper tells the story of how paper money evolved as a result of lending by banks. While lending commodity money requires holding large reserves of commodity money to ensure liquidity, issuing convertible paper money reduces these costs significantly. The paper also examines the possibility of issuing inconvertible notes and shows that while th...
Article
Since unification, the debate about Germany's poor economic performance has focused on supply-side weaknesses, and the associated reform agenda sought to make low-skill labour markets more flexible. We question this diagnosis using three lines of argument. First, effective restructuring of the supply side in the core advanced industries was carried...
Article
From 1970 to 1985, Israel experienced high inflation. It rose in three jumps to new plateaus and eventually exceeded 400% per annum. This paper claims that anticipated monetary and fiscal effects of a massive government bailout of owners of fallen bank shares caused the last big jump in inflation that occurred in October 1983. Bank shares had just...
Article
The recent widening of wage inequality has been attributed by some to skill-biased-technical-change and by others to trade liberalization. This paper examines the two explanations within a unified model and also presents a new modeling of skill-biased-technical-change, where skilled workers replace unskilled ones. As a result technology adoption is...
Article
Full-text available
** This paper tests the cyclicality of fiscal policy in Israel. We find that government deficits are mildly counter-cyclical, mainly in recessions. Expenditures, and in particular, public investment, are pro-cyclical. However, we find that both the government deficit and expenditures have become more counter-cyclical after 1985, a period that is ch...
Article
Acknowledging that wage inequality and intergenerational mobility are strongly interrelated, this paper presents a model in which both are jointly determined. The model enables us to study how inequality and mobility are affected by exogenous changes and what determines their correlation. A main implication of the model is that differences in the a...
Article
Full-text available
We use a general equilibrium OLG model to analyse the relation between intergenerational social mobility and wage inequality. We show that the correlation between mobility and inequality depends on which factor caused the change in inequality. The model can thus help discriminate between different competing explanations of the recent rise in US wag...
Article
This paper builds a model of growth through industrialization, where machines replace workers in a growing number of tasks. This enables the economy to experience long-run growth, as machines become servants of humans, and as their number grows unboundedly. The mechanism that drives growth is feedback between industrialization and wages. High wages...
Article
Consumers make transactions of different sizes over time. This paper shows that this fact, together with transaction costs of various assets, can help in developing a theory of liquidity. Assets with different cost structures are used to purchase different sizes of transactions. This can explain the demand for money itself, the precautionary demand...
Article
We study the cyclical effects of the timing of durable goods purchases in a general equilibrium model in which both durable and non-durable goods are consumed and the durable good is lumpy. At the microeconomic level, the timing of durable goods purchases supplies some insulation for non-durable consumption over the cycle. At the macroeconomic leve...
Article
This paper presents a theory of inflation in commodity money and supports it by evidence from inflationary episodes in France during the 14th and 15th centuries. The paper shows that commodity money can be inflated similarly to fiat money through repeated debasements, which act like devaluations. Furthermore, as with fiat money, demand for commodit...
Article
Full-text available
There were marked shifts in both the share of national expenditure on education in GDP, as well as in its composition, in 1962-98. At the beginning of the period the share of education in GDP soared, remained relatively constant in the 1970s, declined in the 1980s, and began to rise again in the 1990s. This paper analyzes the relations between thes...
Article
Matching university places to students is not as clear cut or as straightforward as it ought to be. By investigating the matching algorithm used by the German central clearinghouse for university admissions in medicine and related subjects, we show that a procedure designed to give an advantage to students with excellent school grades actually harm...
Article
This paper claims that technical progress induces early retirement of older workers. It presents a model where human capital is technology specific, so that technical progress erodes some existing human capital. This affects mostly older workers, who have a smaller incentive to learn the new technology, since their career horizon is shorter. Hence,...
Article
Full-text available
I show that non-convexities in technology, assumed in the capi-tal market imperfection literature on the relationship between income distribution and economic growth, can be replaced by an assumption that the bequest function is convex with respect to income.
Article
We study the cyclical effects of the timing of durable goods purchases in a general equilibrium model in which both durable and non-durable goods are consumed and the durable good is lumpy. At the microeconomic level, the timing of durable goods purchases supplies some insulation for nondurable consumption over the cycle. At the macroeconomic level...
Article
Full-text available
This chapter analyzes the significant decline in the relative size of the Israeli public sector after 1985. We present evidence that fiscal discipline increased significantly after 1985, which contributed to this decline. We show that the reduction of public expenditure can be attributed to three main factors: the decline of defense expenditure, th...
Article
This paper offers an informational explanation to stock markets' booms and crashes. This explanation builds on the idea of `informational overshooting': if market fundamentals change for an unknown period of time, prices experience a boom, which ends in a crash, due to informational dynamics. The paper then shows that `informational overshooting' o...
Article
This paper describes a feedback effect between real and financial development. The paper presents a new variable, which we call the cost of financial intermediation, through which the feedback between finance and growth operates. The theoretical part of the paper describes how specialization of financial intermediaries leads to such a feedback effe...
Article
This paper describes a feedback effect between real and financial development. The paper presents a new variable, which we call the cost of financial intermediation, through which the feedback between finance and growth operates. The theoretical part of the paper describes how specialization of financial intermediaries leads to such a feedback effe...
Article
This paper analyzes a model of economic growth, with technological innovations that reduce labor requirements but raise capital requirements. The paper has two main results. The first is that such technological innovations are not everywhere adopted, but only in countries with high productivity. The second result is that technology adoption signifi...
Article
Full-text available
This paper reformulates the well known financial development conjecture (FDC) and supplies some new empirical evidence in its favour. The financial development conjecture, namely, that there exist strong feedback effects between real and financial development, is described in this paper by use of the cost of financial intermediation. The theoretica...
Article
This paper shows that if demand is unknown and continuously changing and if investment is costly, then output and investment are cyclical. The cycles are generated by changes in information over time, as investors increase production and thus accumulate more information about demand. These are, therefore, informational cycles. The paper also shows...
Article
Full-text available
This paper analyzes the role of wealth distribution in macroeconomics through investment in human capital. It is shown that in the presence of credit markets' imperfections and indivisibilities in investment in human capital, the initial distribution of wealth affects aggregate output and investment both in the short and in the long run, as there a...
Article
The paper presents a monetary growth model in which the assets market precedes the goods market in each period instead of following it as in standard cash-in-advance models. As a result of this change in timing, money is held by sellers and not only by buyers, and it is shown that as a result inflation reduces the rate of capital accumulation.
Article
This paper examines the effect of fiscal expansions on the real exchange rate in a small open economy, where home and foreign assets are imperfect substitutes. There is an hypothesis, raised by Sachs and Wyplosz (1984), Dornbusch and Fischer (1986), and others, that risk and imperfect substitutability of assets can explain why fiscal expansions som...
Article
This paper claims that credit market imperfections matter significantly to open economies and can alter basic macroeconomic results. This is demonstrated in the paper by use of an open-economy model with individual credit rationing, due to asymmetric information and moral hazard. The paper concentrates on the effect of fiscal policy and shows that...
Article
This paper examines the effect of cost and price uncertainty on the optimal rate of investment by firms within a general equilibrium framework. Former works which have studied this issue like Hartman (1972) and Abel (1983, 1984, 1985) have come to the conclusion that this effect is positive, since increased price uncertainty raises expected profita...
Article
This paper examines theoretical issues of inflationary inertia by use of a wage-price spiral model, in which wage and price decisions are staggered. It is shown that within such a framework inflation is inertial in the following sense: a monetary disinflation cannot immediately succeed and the rate of inflation declines gradually. It is also shown...
Article
Yaari (1987) proved that within the anticipated utility framework, a risk averse decision maker will have precautionary saving regardless of the sign of the third derivative of his utility function. In this note we extend (a modification of) this result for an n-period model.
Article
This paper examines the dynamics of capital accumulation in a small open economy where home capital is risky and consumers are risk-averse. It is assumed that the economy participates in perfect international bond markets but that risky home capital is held by domestic residents only. Under these assumptions the rate of investment is no longer inde...

Citations

... Around these two views evolved a vast literature. Given the number of significant contributions to this debate (see Battisti et al. 2020;Bergeaud et al. 2020;Comin and Mestieri 2018 for the latest), we aim not to comprehensively review the whole discussion, we rather send a reader to the recent survey of the literature of Johnson and Papageorgiou (2020). Nevertheless, we review selected recent works, which have the closest connection with our paper. ...
... Adusei (2013),Akinlo and Egbetunde (2010),Allen and Ndikumana (1998),Aziakpono (2004),Sunde (2012),Benhabib and Spiegel (2000),Harrison et al. (1999),Eschenbach (2004),Odhiambo (2009),Demetriades and Hussein (1996). ...
... This paper contributes to different areas of the literature. First, the theoretical framework builds from the task models of Zeira (1998), Acemoglu and Autor (2011), Acemoglu and Restrepo (2018) and Nakamura and Zeira (2018). Relative to this literature, this paper proposes a bridge to reconcile the equilibrium unemployment literature with the economic decision of task automation. ...
... The first perspective highlights the relative cost of labor versus capital. The literature on labor costs induced innovations assumes that technology adoption is a function of the relative prices of capital versus labor, with higher wages encouraging firms to automate and lower wages discouraging it (Acemoglu 2010;Alesina et al. 2018). Presidente (2019) argues that higher labor costs caused by labor-friendly institutions incentives firms to implement labor-substituting technologies and discourages investments in labor-complementing technologies. ...
... This suggests an inverted U-shaped curve in income distribution, with economic growth resulting in relatively more inequality in the initial stages of development but greater equality at advanced stages. Greenwood and Jovanovic (1990), Banerjee and Newman (1993), Galor and Zeira (1993), Perotti (1993), and Barro (2000) find a positive correlation between growth and income inequality in a cross-section of international data. This hypothesis, however, is challenged by other studies. ...
... The methods in all of the studies in Table 1 are subject to the criticism that the analysis is affected by the mechanical correlation between the dependent and the main independent variable. An exception is the paper by Battisti and Zeira (2016), where net inequality is explained by gross inequality; however, the authors do not discuss the mechanical correlation issue that we highlight. Finally, Muinelo-Gallo and Roca-Sagalés (2013) offer a system approach, where in one of the equations, net inequality is regressed on fiscal policy measures, such as public expenditure, and in another, gross inequality is used to predict fiscal policy variables. ...
... Generally, sectoral dynamics are endogenous to economic growth and, in a growing economy, diversification to new modern sectors first increases and later decreases. With such dynamics, the modern sectors should substitute and not complement the traditional sectors in the overall economic growth equilibrium (Zeira & Zoabi, 2015). ...
... Farmer and Zabczyk (2016) raise the possibility that central bank balance sheet policies can play a role in influencing nonfundamental asset price movements. The imperfect knowledge models of Eusepi and Preston (2018), Branch and Evans (2011), Zeira (1999) and Burnside (2016) point to learning mechanisms that can generate boom-bust type behaviour. This type of behaviour has been borne out by microeconomic studies (Anunfriey and Hommes (2012)). ...
... The banking crisis and the impossibility of stabilizing the exchange rate led to a change in domestic agents' behaviour. Whereas Sargent and Zeira (2011) consider that this 'episode presents a particularly clear example of the 'unpleasant monetarist arithmetic' of Sargent and Wallace (1981), according to which an anticipated future monetary expansion triggers an immediate rise in inflation coming from rational expectations and a negative dependence of money demand on expected inflation', for reasons to be explained later we prefer to identify here the key role played in a hyperinflationary dynamic by exchange-rate anticipations and by self-fulfilling behaviours. Note: The tendency for inflation to strengthen over the period is also found when using annual inflation rates (see Table 4). ...
... It is also argued that a little inflation is beneficial for the economy (Danziger, 1988; Grunwald, 2010). However if this is occurring due to monetary expansion, then it is assumed to be equivalent to debasement of currency during old times (Sussman & Zeira, 2003) whose benefit is reaped by a spenders of newly created money-belonging to the upper class or the government. This is at the cost of loss of purchasing power for those who will get this money after it is debased, as explained earlier, or the savings they already have. ...