UCL Department of Economics


Macroeconomics Online Seminar presented by Nathan Zorzi (USC)

07 October 2020, 4:00 pm–5:00 pm

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"Investment Dynamics and Cyclical Redistribution"

Event Information

Open to



Department of Economics – Department of Economics


056: Bentham House
4-8 Endsleigh Gardens
United Kingdom
Abstract:  Demand for durable goods and residential investment is strongly pro-cyclical. Workers employed in durable industries are imperfectly insured against these fluctuations, leading to distributional consequences during booms and busts. This paper studies the interaction between the cyclicality of durable demand and redistribution of labor income. I explore this feedback loop within a heterogeneous agent New Keynesian (HANK) model with multiple sectors and lumpy durable adjustment. Income redistribution emerges endogenously when labor mobility between sectors is limited. Crucially, lumpy adjustment at the micro level generates non-linearities at the macro level: the average marginal propensity to spend on durable goods varies with the size of income shocks. As a result, redistribution of labor incomes has aggregate effects. I find that the interaction between cyclical investment and redistribution amplifies the aggregate response of durable investment during booms and dampens it during recessions. The lumpy nature of durable adjustment entirely accounts for this non-linear effect.


Zoom Meeting ID: 923 2723 1946
Password:  15=ZX8
all online, *European Speakers at 11:15am, Asian speakers at 9:00am, US speakers at 4:00pm



About the Speaker

Nathan Zorzi

at USC

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