Loukas Karabarbounis

Consultant

loukas@umn.edu
CV
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Interests:
Labor economics
Productivity
International macroeconomics

Loukas Karabarbounis is a consultant at the Federal Reserve Bank of Minneapolis, an associate professor of economics at the University of Minnesota, a faculty research fellow at the National Bureau of Economic Research, and an associate editor at the Journal of Monetary Economics. He earned a Ph.D. in economics from Harvard University in 2010. He is the recipient of a 2016 Sloan Research Fellowship awarded by the Alfred P. Sloan Foundation.

His latest research focuses on topics such as the global decline of labor’s share of income, productivity and capital flows in South Europe, and cyclical fluctuations in labor markets. His work has been published in academic journals such as the American Economic Journal, the American Economic Review, the Economic Journal, the Journal of Monetary Economics, the Quarterly Journal of Economics, and the Review of Economic Dynamics.

The Global Rise of Corporate Saving

The sectoral composition of global saving changed dramatically during the last three decades. Whereas in the early 1980s most of global investment was funded by household saving, nowadays nearly two-thirds of global investment is funded by corporate saving. This shift in the sectoral composition of saving was not accompanied by changes in the sectoral composition of investment, implying an improvement in the corporate net lending position. We characterize the behavior of corporate saving using both national income accounts and firm-level data and clarify its relationship with the global decline in labor share, the accumulation of corporate cash stocks, and the greater propensity for equity buybacks. We develop a general equilibrium model with product and capital market imperfections to explore quantitatively the determination of the flow of funds across sectors. Changes including declines in the real interest rate, the price of investment, and corporate income taxes generate increases in corporate profits and shifts in the supply of sectoral saving that are of similar magnitude to those observed in the data.

The Limited Macroeconomic Effects of Unemployment Benefit Extensions

By how much does an extension of unemployment benefits affect macroeconomic outcomes such as unemployment? Answering this question is challenging because U.S. law extends benefits for states experiencing high unemployment. We use data revisions to decompose the variation in the duration of benefits into the part coming from actual differences in economic conditions and the part coming from measurement error in the real-time data used to determine benefit extensions. Using only the variation coming from measurement error, we find that benefit extensions have a limited influence on state-level macroeconomic outcomes. We use our estimates to quantify the effects of the increase in the duration of benefits during the Great Recession and find that they increased the unemployment rate by at most 0.3 percentage point.

The Cyclicality of the Opportunity Cost of Employment

The flow opportunity cost of moving from unemployment to employment consists of foregone public benefits and the foregone value of non-working time in units of consumption. We construct a time series of the opportunity cost of employment using detailed microdata and administrative or national accounts data to estimate benefits, hours per worker, consumption by labor force status, taxes, and preference parameters. Our estimated opportunity cost is procyclical and volatile over the business cycle. The estimated cyclicality implies far less unemployment volatility in many leading models of the labor market than that observed in the data, irrespective of the level of the opportunity cost.

Capital Allocation and Productivity in South Europe

Following the introduction of the euro in 1999, countries in the South experienced large capital inflows and low productivity. We use data for manufacturing firms in Spain to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor across firms, and a significant increase in productivity losses from misallocation over time. We develop a model of heterogenous firms facing financial frictions and investment adjustment costs. The model is consistent with cross-sectional and time-series patterns in size, productivity, capital returns, investment, and debt observed in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, generates a decline in sectoral total factor productivity as capital inflows are misallocated toward firms that are not necessarily the most productive. We conclude by showing that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway.