The American Economic Journal: Macro economics was established in 2007 along with three other field journals focusing on micro economics, applied economics, and economic policy. As stated in the call for papers and on the jour nal Web site, AEJ: Macroeconomics focuses on studies of aggregate fluctuations and growth, and the role of policy in that context. Such studies often borrow from and interact with research in other fields, such as monetary theory, industrial organization, finance, labor economics, political economy, public finance, international econom ics, and development economics. To the extent that they make a contribution to macroeconom ics, papers in these fields are also welcome. The first order of business before the jour nal went into operation was the recruitment of a Coeditor. I was delighted that Steve Davis (University of Chicago) agreed to join. Steve and I have worked extremely well together. The second order of business was the recruit ment of members of the Board of Editors. This turned out to be easier than I expected, as nearly all the researchers we approached agreed to join. The Board of Editors consists of: Mark A. Aguiar (University of Rochester), Nick Bloom (Stanford University), Pierre Cahuc (Paris Pan theon), John Campbell (Harvard University), Yongsung Chang (University of Rochester), John H. Cochrane (University of Chicago, GSB), William Easterly (New York University), Jordi Gali (CREI), Martin Eichenbaum (Northwestern University), Erik Hurst (University of Chicago, GSB), Charles I. Jones (University of California, Berkeley), Anil Kashyap (University of Chicago, GSB), David Laibson (Harvard University), Jonathan A. Parker (Northwestern University), Maurice Obstfeld (University of California, Berkeley), Thomas Philippon (New York Uni versity), Chris Pissarides (London School of Economics), Valerie A. Ramey (University of California, San Diego), Christina D. Romer (Uni versity of California, Berkeley), David Romer (University of California, Berkeley), Thomas J. Sargent (New York University), Mark W. Watson (Princeton University), Ivan Werning Report of the Editor

We consider two life cycle models of labor supply that use nonconvexities to generate retirement. In each case we derive a link between hours worked prior to retirement, the intertemporal elasticity of substitution for labor (IES), and the size of the nonconvexities. This link is robust to allowing for credit constraints and human capital accumulation by younger workers and suggests values for the IES that are .75 or higher.

The structural-change literature typically assumes that investment is produced in manufacturing. We establish that this assumption is counterfactual: in the postwar U.S., the share of services value added in investment expenditure has been steadily growing. We develop a new model that features structural change in investment and consumption, characterize its equilibrium properties, and provide empirical support for it. We establish that modelling structural change in investment leads to three novel insights: constant TFP growth in all sectors is inconsistent with the existence of aggregate balanced growth with structural change; the sector with the slowest TFP growth absorbs all resources asymptotically; technical change is endogenously investment-biased.

Using a broad panel of advanced economies, we document that increases in GDP per capita are associated with a systematic shift in the composition of value added to sectors that are intensive in high-skill labour, a process we label as skill-biased structural change. It follows that further development in these economies leads to an increase in the relative demand for skilled labour. We develop a quantitative two-sector model of this process as a laboratory to assess the sources of the rise of the skill premium in the U.S. and a set of ten other advanced economies, over the period 1977 to 2005. For the U.S., we find that the sector-specific skill neutral component of technical change accounts for 18–24% of the overall increase of the skill premium due to technical change, and that the mechanism through which this component of technical change affects the skill premium is via skill-biased structural change.

This paper explores some macroeconomic implications of including household production in an otherwise standard real business cycle model. The authors calibrate the model on the basis of microeconomic evidence and long-run considerations, simulate it, and examine its statistical properties. They find that introducing home production significantly improves the quantitative performance of the standard model along several dimensions. It also implies a very different interpretation of the nature of aggregate fluctuations.