Distinguished Alumni

Zvi Hercowitz '80

Zvi HercowitzZvi Hercowitz was born in Rosario, Argentina on December 21, 1945 and in December 1965 he emigrated to Israel. In October 1969 -- after serving in the army -- he began his studies at the Hebrew University in Jerusalem, where he received the bachelor's degree in economics in February 1973 and the master of arts in economics in July 1975.

Immediately after that, he began graduate work at the University of Rochester. His areas of specialization are macro and monetary economics and international economics. In 1980 he completed his dissertation "Money and the Dispersion of Relative Prices" under the supervision of Professor Robert Barro.

Zvi Hercowitz joined Tel Aviv University in 1980 where he remains today. He also serves as an advisor to the Bank of Israel. He has been a visiting professor at Carnegie Mellon University, the University of Michigan, the University of Rochester, and the University of Western Ontario.

Some of his most influential publications are:

"Money and the Dispersion of Relative Prices", Journal of Political Economy, April 1981.

Variability over time in aggregate indices of price level , such as the CPI, is often associated with a greater dispersion in relative prices at a point in time. To model this phenomena, Zvi Hercowitz uses a variant of the celebrated Lucas-Barro island model. In a world where people have incomplete information, individuals are confronted with the problem of determining whether price changes in specific goods are caused by general price inflation or by shifts in the supply and demand for this good. In the Lucas-Barro island model perfectly perceived money growth should not affect relative prices. Money growth has to be unperceived to have real effects. Using data from the German hyperinflation, an equation that relates price change dispersion to exogenous unperceived money shocks is estimated. Zvi finds that unperceived money growth does affect price dispersion, as the model predicts, while perceived money has no effect. This paper derives from Zvi's thesis at the University of Rochester.

"Output Growth, the Real Wage, and Employment Fluctuations", American Economic Review, December 1991, (with Michael Sampson).

In this work Zvi Hercowitz and Michael Sampson develop and estimate one of the first models of economic growth and cycles. Endogenous long-run growth is formulated along the lines of Romer (1986). This engine for growth is dropped into a business cycle model in the spirit of Kydland and Prescott (1982) and Long and Plosser (1983). Shocks come about from both neutral and capital-embodied technological change. Unlike standard real business cycle models, temporary shocks have permanent effects on output and wages in this framework.

"Long-Run Implications of Investment-Specific Technological Progress", American Economic Review, June 1997, (with Jeremy Greenwood and Per Krusell).

Casual empiricism suggests that technological progress is often embodied in the form of new and improved capital goods. Many examples come to mind: computers, robots, cell phones and the like. The paper analyzes the role of this type of technological change in U.S. economic growth. The results suggest that investment-specific technological progress accounts for the major part of U.S. economic growth over the postwar period.

Apart from his research work, Zvi Hercowitz enjoys drawing and painting.

Nestor Gandelman (October 27, 1998)