Nadav Ben Zeev

Chronicle of a War Foretold: The Macroeconomic Effects of Anticipated Defense Spending Shocks

We identify US defense news shocks as shocks that best explain future movements in defense spending over a five-year horizon and are orthogonal to current defense spending. Our identified shocks are strongly correlated with the Ramey (2011) news shocks, but explain a larger share of macroeconomic fluctuations and have significant demand effects. Fiscal news induces significant and persistent increases in output, consumption, investment, hours and the interest rate. Standard DSGE models fail to produce such a pattern. We propose a sticky price model with distortionary taxation, variable capital utilization, capital adjustment costs and rule-of-thumb consumers that replicates the empirical findings.

Flexible Supply of Apprenticeship in the British Industrial Revolution

In this paper we explore the response of the supply of human capital to changes in demand in the British Industrial Revolution. We use annual information from the Stamp Tax registers on apprentices in England between 1710-1803 and examine the response of tuitions to changes in the annual number of apprentices employing two methods, a two stage instrumental variable procedure to estimate a static market system and a Vector Autoregression framework (VAR) to test the short-run and long-run responses. Our findings show that the standard supply elasticity was high in the sense that the tuition increased only slightly in response to increases in the number of apprentices and that tuitions rose in the short run while returning to their equilibrium level in the long run. Furthermore, we find that this efficiency was characteristic of the system as a whole and not particular to specific trades. These findings underpin the belief that effectiveness and adaptability of the British economy in supplying highly skilled workers played an important role in the Industrial Revolution.

Monetary Policy, Fiscal Federalism, and Capital Intensity

Can monetary policy shocks induce redistribution across natural resource rich and poor states within a federation? We conjecture that resource-rich states are capital intensive, hence their investment is more responsive to changes in monetary policy. Consequently, contractionary monetary policy shocks (e.g., increases in the interest rate) may induce redistribution from resource-poor states to resource-rich ones, via an equalizing federal transfer scheme, because investment is reduced more strongly in the latter. We test these hypotheses using a panel of U.S. states covering several decades, and find that: i) resource-rich states are significantly and persistently more capital intensive; ii) contractionary monetary policy shocks induce a relative drop (increase) in investment (federal transfers) in resource-rich states, over the course of four years; iii) these patterns are driven by resource-induced differences in the capital share in the economy. We estimate that a one standard deviation contractionary monetary shock induces, within the first year, federal redistribution of approximately

Emerging economies business cycles: The role of commodity terms of trade news☆

2.5 billion from the resource-poor to the resource-rich states, representing about 11% of the total average annual federal transfers received by the latter states.