Essays on economic fluctuations in a vintage capital model

I use the vintage capital model to study the dynamic response of the economy to changes in technological processes. Technological change is an important factor in determining the growth of productivity and output and in determining the business cycle in United States. Of particular interest is investment-specific technological change or embodied technological change.;There are three essays in this dissertation. In the first essay (Chapter 2), the vintage capital model with heterogeneous labor has been used to explain economic fluctuations with both disembodied and embodied technological progress. I have shown that the two different kinds of technology shocks lead to different responses in the key macroeconomic variables (consumption, investment, and output). The number of vintages of capital good (which establishes the service life of capital) and the sequences (or series) of technology shocks, as well as the persistence of shock processes can also make a difference.;The second essay (Chapter 3) examines the rise in the wage premium that has taken place over the last 3 decades, especially during the 1980s. In the vintage capital model with the heterogenous labor, the framework of the model can examine how new technology affects the demand of labor. I find that technological progress enhances labor productivity and can increase the wage rate of workers, but the increase in the wage premium is much too low to be consistent with that observed in the data. From the perspective of this model, the labor demand-driven factors do not appear to be a plausible explanation for the observed increase in the wage premium. Hence I examine whether labor supply factors may be able to account for the observed dramatic increase in the wage premium. I find that modest changes in the distribution of the workforce can have very large effects on the wage premium. Hence the changes in the supply of the skill distribution of the workforce appear to be a promising avenue of future research.;In the final essay (Chapter 4), I focus on the responses in the allocation of time of households to both permanent embodied technology and transitory technology shocks in the vintage capital model in which growth is determined endogenously through investment in human capital. I show that the different sources of technology shocks can lead to different dynamic responses of key macroeconomic variables, especially in the allocation of time. These results suggest differentiating between these shocks may help explain shifts in the cyclical behavior of the economy and may play a significant role in accounting for the evolution of human capital in the economy, and thereby deserve further study.