Using linked data from multiple years of the U.S. Census of Agriculture, this study identifies farm and operator characteristics associated with beginning farm survival, growth, and success. Success is defined as continuing in business for 5 years without a decline in farm real estate asset value. The results indicate which types of beginning farms and farmers are likely to survive and grow—information which could be useful in targeting program resources. By identifying policy-amenable variables that correlate with both farm survival and business expansion, the results also suggest possible mechanisms for increasing the success of beginning farms.

We estimate the relationship between GDP per capita growth and the growth rate of the national saving rate using a panel of 130 countries over the period 1960–2017. We find that GDP per capita growth increases (decreases) the growth rate of the national saving rate in poor countries (rich countries), and a higher credit-to-GDP ratio decreases the national saving rate as well as the income elasticity of the national saving rate. We develop a model with a credit constraint to explain the growth-saving relationship by the saving behavior of entrepreneurs at both the intensive and extensive margins. We further present supporting evidence for our theoretical findings by utilizing cross-country time series data of the number of new businesses registered and the corporate saving rate.

Many farmers face borrowing limits that depend on their household income and net worth. Given such credit constraints, an increase in off-farm income should allow farmers to borrow more, thus influencing production decisions and productivity. To test this hypothesis, the education level of the farm operator’s spouse is used to identify exogenous variation in off-farm income. Findings indicate that higher off-farm income leads to more borrowing, capital expenditures, capital input intensity, farm labor use, output, farm income, and productivity. Results suggest that Federal programs that promote access to credit for limited-resource farmers may increase farm investment and productivity.

In this paper, we investigate the importance of aggregate fluctuations for the assessment of the optimal level of public debt in an incomplete-markets economy. We start by building a steady state model in which households are only subject to uninsurable idiosyncratic risk and evaluate the optimal level of public debt. We then augment the model to allow for aggregate risk and measure the impact on the optimal level. We show that the cyclical behavior of the economy has a quantitative impact on this level that can be decomposed into the effects of the aggregate productivity shock and the cyclicality of unemployment. Moreover, we find that matching wealth distribution statistics substantially changes the optimal level of public debt.

We add households with heterogeneous discount factors and constrained credit to a research and development (R&D)-based endogenous growth model. Borrowers' access to credit has profound implications for growth. The direction and magnitude of this effect depend on preferences over labor supply. If labor supply is highly elastic and households do not smooth their labor supply between labor that produces output and R&D, annual growth decreases from 11.6% to approximately zero as the debt-to-capital ratio rises from 0 to 1.38. If households instead have a strong preference for smoothing their labor supply, then growth increases from 2.91% to 3.83% as the debt-to-capital ratio rises from 0 to 1.55. In both cases, less elastic labor supply weakens these effects. The results are similar if existing ideas do not affect the creation of new ideas. Now, when households do not smooth their labor supply, less debt results in faster growth, and productivity and output converge to much higher values.

Several papers show that a privatization of the social security system will not be politically supported by the current generations. The asymmetry in the timing of welfare gains and losses is what generates a status quo bias in favor of the unfunded system. We explore a simple mechanism to offset the status quo problem using a general-equilibrium overlapping generations model with endogenous labor supply calibrated to the Spanish economy. The mechanism implies a privatization of the social security system together with the elimination of compulsory retirement rules. Along the transition path, this mechanism drastically shortens (from three decades to only one decade) the convergence to the new steady state, diminishing the asymmetry in the timing of welfare gains and losses. As a result, there is an increase beyond 50% in the fraction of individuals that are better off with the implementation of such a reform.This work has benefited from useful comments by Jonathan Heathcote, Antonio Manresa, and seminar participants at CREB, Carlos III de Madrid, ESF Network in Social Insurance, and Stockholm School of Economics. We acknowledge financial support from Ministerio de Ciencia y Tecnología (SEC2000-0796) and Generalitat de Catalunya (SGR00-016).

In this paper, I explore the dynamics of real estate market fluctuations and business cycle co-movements in a neoclassical setting. Applying a dynamic stochastic general equilibrium model of collateral constraints with asset reallocation to Japan, I find that public policy shocks account well for the business cycle dynamics. In particular, taxes on land holdings of households mimic the impact of a housing preference shock, and if volatile enough, can trigger large asset price fluctuations. However, in the absence of volatility, the impact on prices is intrinsically linked to the persistence of shocks. Dependence on fixed assets such as real estate to secure collateral-based financing significantly amplifies the effect of initial shocks on the real macro aggregates. The financial accelerator works through the “redistribution channel,” shifting a large fraction of the collateral between constrained and unconstrained agents in response to an external stimuli.

The sensitivity of farm inventory investment to movements in cash flow is tested. Inventories should be sensitive to shifts in cash flow because inventory investment is readily reversible and inventories are a significant portion of assets. Investment models estimated with Kansas farm panel data indicate that: (a) farms absorb internal finance shocks by adjusting inventories, (b) the inventory investment of livestock and high-debt farms are more sensitive to movements in cash flow than crop and low-debt farms, and (c) inventory investment is more sensitive to cash flow during the 1981-86 bust and the 1987-92 recovery than during the 1975-80 boom.

This research demonstrates that international financial integration changes the way in which financial development affects inequality within a country. Specifically, both cross-country analysis and dynamic panel data analysis using data collected from more than 100 countries provide evidence indicating that if the financial market of a country is strongly closed to the world market, financial development narrows inequality within that country, whereas if the financial market of a country is strongly open to the world market, financial development widens inequality within that country. Our theoretical framework provides a possible explanation for our empirical findings.

Parental beliefs are recognised by psychologists as an important causal influence on child development. A two-period model of human capital accumulation in the framework of Becker and Tomes (1986) is presented. In the first period parents transfer their beliefs, distinct from genes, to children by signalling their ‘belief in a just world’ or their perceived return to effort. Children respond by choosing effort, irrespective of the real world returns, which combines with their genes to create early ability. This determines the rate of return to second-period investment and final attainment. If parents are credit constrained, both beliefs and income determine attainment. Empirical analysis using the second generation of the NCDS shows that beliefs are a strong predictor of early attainment and significantly reduce the importance of parental income. The identifying assumption is that parent beliefs are slow-moving and not conditioned on the child.

Several papers show that a privatization of the social security system will not be politically supported by the current generations. The asymmetry in the timing of welfare gains and losses is what generates a status quo bias in favor of the unfunded system. We explore a simple mechanism to offset the status quo problem using a general-equilibrium overlapping generations model with endogenous labor supply calibrated to the Spanish economy. The mechanism implies a privatization of the social security system together with the elimination of compulsory retirement rules. Along the transition path, this mechanism drastically shortens (from three decades to only one decade) the convergence to the new steady state, diminishing the asymmetry in the timing of welfare gains and losses. As a result, there is an increase beyond 50% in the fraction of individuals that are better off with the implementation of such a reform.This work has benefited from useful comments by Jonathan Heathcote, Antonio Manresa, and seminar participants at CREB, Carlos III de Madrid, ESF Network in Social Insurance, and Stockholm School of Economics. We acknowledge financial support from Ministerio de Ciencia y Tecnología (SEC2000-0796) and Generalitat de Catalunya (SGR00-016).

We study the quantitative properties of a dynamic general equilibrium model. Agents face both idiosyncratic and aggregate income risk, state-dependent borrowing constraints that bind occasionally, and markets that are incomplete. Equilibrium consumption-savings plans and asset prices are computed under various assumptions about income uncertainty. Then, we investigate whether the model replicates two empirical observations: the high correlation between individual consumption and individual income, and the equity premium puzzle. We find that, when the driving processes are calibrated according to the data from wage income in different sectors of the U.S. economy, the results move in the direction of explaining these observations, but we fall short of explaining the observations quantitatively. If the incomes of agents are assumed to be independent of each other, the observations can be explained quantitatively.

Are firms and households constrained in the use of a productive input? Theoretical approaches to this question range from exogenously imposed credit allocation rules to endogenous market failures stemming from some sort of limited-commitment or moral-hazard problem. However, when testing for constraints, researchers often simply ask firms or households if they would wish to borrow more at the current interest rate and/or test for suboptimal use of inputs in production functions relative to a full-information, full-commitment benchmark. We demonstrate that if credit is part of a much larger information-constrained (or limited-commitment) incentive scheme, then input use may very well be distorted away from the first-best. Further, households and firms, in certain well-defined circumstances, may, at the true interest rate or opportunity cost of credit, desire to borrow more (or less) than the assigned level of credit. In other, more constrained, contractual regimes, firms and households would say that they do not want to borrow more (or less), but these regimes are decidedly suboptimal, although the magnitude of the loss does depend on parameter values. We conclude with empirical methods that, in principle, could allow researchers armed with enough data to estimate parameters and distinguish regimes. Researchers then could see if firms and households are truly constrained and, if so, what the welfare loss might be.