Abstract
In the first chapter of my dissertation, I document three new stylized facts about sectoral comovement in the United States during the Great Recession and set up a multisector general equilibrium model to explain them. The first fact is that, unlike any other recessions after World War II, the output correlations between two sectors significantly increased during the Great Recession and reverted to the previous level afterward. Second, this increased comovement is positively correlated with the number of the input-output linkages between two sectors, reflecting the extensive margin of interconnectedness. Third, trade credit supply, as measured by the ratio of account receivables to the total value of outputs, collapsed during the Great Recession. Moreover, two sectors that experienced such a trade credit contraction had their correlation increasing more, on average, than two that did not. I then develop a multisector model with the endogenous supply of trade credit to explain these facts. The model shows that equilibrium trade credit reflects both the intermediate supplier's and client's bank lending conditions, and thus has asymmetric effects on sectoral outputs. If only the supplier (client) is financially constrained due to a bank lending shock, trade credit decreases (increases), partially offsetting the effect of the shock on the supplier's (client's) outputs. However, if both of them are financially constrained, trade credit flows toward the more constrained one, which further tightens financial constraint on the other. This mechanism propagates a bank lending shock and causes sectoral outputs to fall together, thereby explaining the increased comovement observed during the Great Recession.
In the second chapter, we analyze job switching and wage growth of young workers, separately considering the jobs experienced by workers before and after college completion. These two groups of jobs consist of very different occupational compositions. Workers with many jobs before college completion and with little or no job experiences before college completion have similar subsequent wage paths. These facts can be interpreted that jobs before college completion contribute less to career building compared to the ones after college completion. If we disregard all jobs before college completion, the number of jobs that are experienced by workers before age 35 are about three jobs fewer than the total number of jobs.
The third chapter is to explain one phenomenons across countries during the Great Recession. It is that no robust relationship has been found between the decline in growth of countries during the Great Recession and their level of trade or financial integration. Here we confirm the absence of such a monotonic relationship, but document instead a strong discontinuous relationship. Countries whose level of economic integration (trade and finance) was above a certain cutoff saw a much larger drop in growth than less integrated countries, a finding that is robust to a wide variety of controls. We argue that standard models based on transmission of exogenous shocks across countries cannot explain these facts. Instead, we explain the evidence in the context of a multi-country model with business cycle panics that are endogenously coordinated across countries.
