Measuring the Impact of Technological Progress on the Household
Abstract: In each of the following chapters, macro models are developed to explore the impact of technological progress on the household. Chapter 1 focuses on the impact of technological progress in transportation on suburbanization. In this chapter, a model of a city is developed in which agents choose both whether or not to own a car, and where to live. Focusing on the period 1910 to 1970, the model is calibrated to match the fall in automobile prices, the rise in real incomes, and the rise in the cost of commuting by public transportation relative to commuting by car. Under the baseline calibration the model predicts both a rise in car-ownership and decentralization. In Chapter 2, a model with leisure production and endogenous retirement is used to explain the declining labor-force participation rates of elderly males. Using the Health and Retirement Study, the model is calibrated to cross-sectional data on the labor-force participation rates of elderly US males by age and their average drop in market consumption in the year 2000. Running the calibrated model for the period 1850 to 2000, a prediction of the evolution of the cross-section is obtained and compared with data. The model is able to predict both the increase in retirement since 1850 and the observed drop in market consumption at the moment of retirement. The increase in retirement is driven by rising real wages and a falling price of leisure goods over time. Finally, in Chapter 3, the welfare gain from technological progress in personal computer production is measured by constructing a simple model of computer demand. The innovation of the model is in the agent's utility function. Preferences are defined such that the marginal utility of zero computer consumption is finite. Thus the model can predict the zero demand for computers observed in the data and generate a finite welfare gain from their introduction into the market. The model is calibrated using data on computer expenditures. The model suggests that the welfare gain from technological progress in personal computers is approximately 4 percent of total consumption expenditure.
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