Three Essays in Macroeconomics

Abstract

This thesis consists of three papers in macroeconomics that investigate the following questions: (1) How do changes in global demand for fossil fuels affect welfare across households in small resource-rich economies? (2) How did the expansion of the oil sector in Canada affect measured aggregate productivity? (3) How sensitive are cross-country comparisons to measurement errors introduced by nominal-to-real conversions? Chapter 1 develops a quantitative model of a fossil fuel exporting economy to show that the oil price boom between 1997 and 2020 increased welfare among young, low-income households between 11\% and 16\%. I then simulate the transition to a Net Zero world between 2020 and 2050 and show that while the fall in global demand for fossil fuels reduces lifetime consumption by 0.56\% (between 0.49\% and 0.77\% for the youngest low-income households), the growth of the clean energy sector can dampen these losses by 15\% to 54\% depending on the speed of the expansion. Chapter 2, co-authored with Pau Pujolas, studies the observed stagnation of Canadian Total Factor Productivity (TFP) between 2000 and 2018. We find that the entirety of the slowdown can be accounted for by the expansion of the oil sector, due to the massive capital investments that occurred. Comparing TFP growth in the rest of the economy to the United States, we find that Canadian TFP grew at comparable rates over the same period. Chapter 3, also co-authored with Pau Pujolas, explores how conclusions drawn from comparing GDP per capita of developed economies relative to the United States differ significantly depending on if current- or constant-Purchasing power parity (PPP) metrics are used. Using data from the Organization for Economic Co-operation and Development (OECD), we first document the differences in the evolution of GDP per capita relative to the US in current-PPPs and constant-PPPs before demonstrating in a numerical example how the choices made in constructing real metrics of GDP to make cross-country comparison can lead to contradictory interpretations.