This dissertation is composed by three chapters presenting different topics in international macroeconomics. The first chapter focuses on the role of private information in the dynamics of sovereign debt yields. I propose a model of sovereign debt and default where information is incomplete: Investors receive private noisy signals about the current state of the economy, resulting in heterogeneous information sets across the investors and the government. I show that having a large enough signal noise is a sufficient condition for uniqueness of equilibrium. The main empirical contribution of this chapter is proposing and implementing a structural estimation strategy for the private information noise. Using forecasts data about real GDP growth in the euro area, available since 1999, I measure private information noise at a quarterly frequency, by insuring that the informational structure of my model implies statistics of forecast dispersion and uncertainty consistent with those observed in the data. Private information noise in the euro area shows two interesting characteristics: It peaks during crises and it has remained persistently larger than before since the Great Recession. I calibrate my model to be consistent with observed moments of the euro area economy, and I show it is successful in accounting key untargeted statistics of sovereign spreads. By means of counterfactual exercises, I assess the impact that a change in private information noise has on the spreads' statistics. First of all, I investigate what are the implications of the private information noise having remained at the lower levels prevalent before the Great Recession. I find that spreads would have been on average lower and less volatile. Then, I simulate my model for various levels of private information noise, and this exercise uncovers a hump-shaped relation between private information noise and the average spread level, and the spread volatility: While spread levels and volatility are initially increasing with private information noise, for large enough levels of the latter the relation becomes negative. The second chapter, written in collaboration with Joao B. Duarte and Luis Felipe S\'{a}enz, studies the divergence in aggregate labor productivity between Europe and the U.S., observed since the 1990's, from a sectoral standpoint. In particular, we are interested in explaining differences in sectoral labor productivity levels in the service sector, by large the most important industry in both European and U.S. economies. An issue in accounting for sectoral contributions to aggregate labor productivity is that the sectoral composition of the economy is endogenous with respect to sectoral productivity dynamics. To tackle this endogeneity, we employ a model of structural transformation portraying an economy with thirteen different sectors, corresponding to agriculture, manufacturing and eleven service industries. By means of our model, we measure cross-country comparable productivity levels in the U.S. and in eight European countries. Then, through a set of counterfactual exercises we identify which sectors are mainly accountable for the falling behind of European labor productivity. We find that the most serious problems are in the service sector, and, more specifically, in wholesale and retail trade, business services, and financial services. Finally, we decompose our measures of labor productivity in total factor productivity and contributions stemming from traditional and ICT capital. We uncover that the underperforming sectors in Europe experienced a significant fall in ICT capital endowment per hour worked with respect to the U.S. Also, total factor productivity accounts for a large share of labor productivity in these services, suggesting that the ultimate cause of the European falling behind has to be found in limitations to TFP growth. The last chapter, written in collaboration with Luis Felipe S\'{a}enz, is about the Ricardo Effect, namely the substitution of capital for labor in the production process at the expense of workers' income, when cheaper capital becomes available. We employ a unique plant-level longitudinal dataset for Colombian manufacturing establishments for the period 1982-1998 to document the existence and quantify the Ricardo Effect in the Colombian manufacturing industry. Moving from a theory of production based on a CES technology, we estimate that the elasticity of substitution between capital and labor is significantly larger than one. This finding proves the existence of the Ricardo Effect. We take into account the fact that Colombia went through a profound transformation in the early 1990's, by the introduction of important market-oriented reforms. Our empirical investigation points out that these reforms did not significantly alter the elasticity of substitution between capital and labor. However, they accelerated the fall in the price of capital relative to the price of labor, which has been occurring since 1986. We extrapolate the average decline in the relative price of capital between 1986 and 1998, and, given our preferred estimate of the elasticity of substitution in the production, we conclude that the Ricardo Effect can account for half of the reduction in the labor income share observed in Colombia between 1994 and 2014.
Sovereign debt, Productivity, Labor income share
University of Illinois - Urbana-Champaign
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University of Illinois at Urbana-Champaign