Heterogeneity and Aggregation: Implications for Labor-Market Fluctuations: Reply

Yongsung Chang and Sun-Bin Kim

American Economic Review, 2014, vol. 104, issue 4, 1461-66

Abstract: Takahashi (2014) has uncovered coding errors in our paper, Chang and Kim (2007)-henceforth, CK. We acknowledge and are embarrassed by these mistakes. We are grateful to Takahashi for uncovering them. While the correction decreases the volatility of the labor market wedge, we find that the main message of CK remains valid: the measured labor market wedge arises endogenously in an economy with incomplete capital markets and indivisible labor supply. For example, our model accounts for 18 percent of the volatility in the labor market wedge in the data; it was 43 percent in CK.

JEL-codes: D31 E32 J22 J24 J31 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.4.1461
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Citations: View citations in EconPapers (6)

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