Wednesday, March 24, 2010

Cross-sectional Tests of Recession Theories

We are starting to get some micro data from the recession, and it will be interesting to see how various types of workers and employers behaved.

Macroblog reports that new firms have been doing proportionately more hiring. Comparing new and old firms is a good way to see whether its (lack of) new loans that is holding back business growth or some kind of problem with old loans. New businesses are not burdened by old loans, but they do benefit from new loans.

I have seen some commentary that the higher income people have fared better in the recession. I'm not sure that's true, but if so, that is consistent with the view that various means-tested benefits are reducing labor supply because the highest income people are unaffected by means-tested benefits.

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