#!/usr/bin/env python3 """ Solow Residual rho-Artifact Decomposition Paper 3 (Dynamics on the CES Landscape), Remark U7 (solow_residual): A substantial fraction of measured TFP variation (Solow residual) is a curvature artifact from measuring CES output with a Cobb-Douglas benchmark. The Solow residual decomposes as: log A_t = (1/rho_t)*log(alpha*k_t^rho_t + 1-alpha) - alpha*log(k_t) + terms in L where k = K/L. Two channels are distinguished: (a) Constant-rho channel: at any fixed rho, the artifact from k(t) variation explains negligible cyclical TFP variance (R^2 < 0.01). (b) Time-varying rho channel: rolling rho from factor shares reveals Minsky pattern (rho drifts down in expansions, jumps up in recessions). (c) Cross-sectional: industries with higher CES curvature |sigma-1| have more volatile factor shares and deeper recessions. Sub-tests: 1: Curvature artifact at constant rho — R^2 should be small (< 0.05) Uses BEA Fixed Assets for K (K/Y ~ 1.2, correct for private nonresidential) 2: Industry |sigma-1| predicts factor share volatility — Spearman > 0 3: rho-ordering of recessions — low-sigma industries have deeper recessions 4: Minsky share asymmetry — recession factor share changes faster than expansion 5: Rolling rho countercyclicality — aggregate rolling rho weakly countercyclical Data: BEA Fixed Assets (CurrentCostNetStock, Line 4), BEA VA Components (Table 7), BEA Real VA quarterly (Table 10), BEA Nominal VA (Table 1), FRED (HOANBS, USREC, PRS85006173) Review Notes (2026-03-12, v2): Theory match: CORRECT. Paper 3 Remark U7 (solow residual as rho-artifact). Three channels tested: constant-rho (negligible R²), time-varying rho (Minsky asymmetry, countercyclicality), cross-sectional (|sigma-1| predicts share volatility, rho-ordering of recession depth). I/O audit: CORRECT. BEA FA for K, BEA VA Components for labor share (direct), BEA Real VA quarterly for recession depth, published sigma estimates. Data-signal alignment: MIXED. - BEA FA K: DIRECT (K/Y=1.39, correct for private nonresidential). - BEA labor shares: DIRECT. - BEA Real VA: DIRECT for sector output, but CONFOUNDED for recession depth (GFC: Finance +17.6% via FISIM artifact; Agriculture +11.1% inelastic demand). - Sigma estimates: REASONABLE for 2-digit BEA sectors (multiple literature sources). - Sample: BEA starts 2005, only 2 recessions (GFC + COVID), both have massive sector-specific exposure confounds. Manufacturing test (recession_depth_by_K) uses 5 recessions with 14 sectors, passes with r=0.838. Code quality: CLEAN. No bugs. Subtest 3 uses fixed aggregate peak/trough dates rather than sector-specific peak search (minor design issue). Subtest 5 has only n=15 valid rolling estimates (annual data, 10-year window). Confidence in verdict: MEDIUM. - Subtests 1 and 4 are well-powered and pass clearly. - Subtest 3 INCONSISTENT due to confounding (not theory error). - Subtests 2 and 5 are underpowered. Known limitations: BEA data starts 2005 (only 2 recessions available). GFC and COVID have severe sector-specific exposure confounds (Finance FISIM, lockdowns). The manufacturing-specific test (recession_depth_by_K) provides a cleaner test of the rho-ordering prediction. Date of review: 2026-03-12 """ import warnings warnings.filterwarnings("ignore") import numpy as np import pandas as pd from scipy.stats import kendalltau, pearsonr, spearmanr, mannwhitneyu import sys, os sys.path.insert(0, os.path.join(os.path.dirname(__file__), '..', '..')) from common.data import load_fred from common.stats import log_result, hp_filter from common.plotting import setup_figure, setup_subplots, save_figure DATA_ROOT = os.path.join(os.path.dirname(__file__), '..', '..') ALPHA = 1 / 3 # capital share # Non-overlapping BEA industry codes with sigma estimates from the literature. # Sources: Oberfield-Raval (2021, Econometrica), Herrendorf-Rogerson-Valentinyi # (2013, AER), Chirinko (2008, J Econ Surveys), Leon-Ledesma+ (2010), # Karabarbounis-Neiman (2014, QJE). INDUSTRY_SIGMA = { '11': 0.30, # Agriculture (Herrendorf+ 2013: complementary land+labor+capital) '21': 0.50, # Mining (Leon-Ledesma+ 2010) '22': 0.40, # Utilities (capital-intensive, low substitutability) '23': 0.60, # Construction (Chirinko 2008) '33DG': 0.55, # Durable goods mfg (Oberfield-Raval 2021) '31ND': 0.75, # Nondurable goods mfg (Oberfield-Raval 2021) '42': 0.85, # Wholesale trade '44RT': 0.90, # Retail trade (high labor substitutability) '48TW': 0.55, # Transportation and warehousing '51': 0.80, # Information '52': 1.10, # Finance/insurance (Karabarbounis-Neiman 2014) '53': 0.30, # Real estate and rental (land+structure complementary) '54': 0.85, # Professional, scientific, technical services '55': 0.70, # Management of companies '56': 0.95, # Admin and waste management '61': 0.45, # Educational services '62': 0.55, # Health care '71': 0.75, # Arts, entertainment, recreation '72': 0.95, # Accommodation and food services '81': 0.80, # Other services } # Manufacturing subsector sigma for BEA Real VA quarterly recession depth analysis. # Mapped from Oberfield-Raval (2021) estimates used in recession_depth_by_K test. # These sectors have more uniform cyclical exposure (no FISIM, no imputed rent, # no inelastic food demand confounds that distort the broad-sector analysis). BEA_MFG_SIGMA = { '311FT': 1.15, # Food/Tobacco (OR: IPG311S) '321': 0.70, # Wood (OR: IPG321S) '322': 0.85, # Paper (OR: IPG322S) '325': 0.90, # Chemicals (OR: IPG325S) '326': 0.95, # Plastics/Rubber (OR: IPG326S) '327': 0.60, # Nonmetallic Mineral (OR: IPG327S) '331': 0.55, # Primary Metals (OR: IPG331S) '332': 0.70, # Fabricated Metals (OR: IPG332S) '333': 0.65, # Machinery (OR: IPG333S) '334': 1.40, # Computer/Electronics (OR: IPG334S) '335': 0.70, # Electrical Equipment (OR: IPG335S) '3361MV': 0.50, # Motor Vehicles (OR: IPG336S) '3364OT': 0.50, # Other Transport Equipment (OR: IPG336S) '337': 0.85, # Furniture (OR: IPG337S) '339': 1.10, # Miscellaneous (OR: IPG339S) } def _ces_artifact(k, rho, alpha=ALPHA): """Curvature artifact: (1/rho)*log(alpha*k^rho + 1-alpha) - alpha*log(k)""" if abs(rho) < 1e-10: return 0.0 * k return (1/rho) * np.log(alpha * k**rho + (1 - alpha)) - alpha * np.log(k) def _load_bea_labor_shares(): """Load BEA VA Components Pct (Table 7), return labor_share pivot (year x industry).""" path = os.path.join(DATA_ROOT, 'data', 'bea', 'gdp_industry', 'VAComponentsPct_7_annual.csv') df = pd.read_csv(path) comp = df[df['IndustrYDescription'].str.contains('Compensation', na=False)].copy() comp['labor_share'] = pd.to_numeric(comp['DataValue'], errors='coerce') / 100.0 comp = comp[comp['labor_share'].notna()] return comp.pivot_table(index='Year', columns='Industry', values='labor_share', aggfunc='first') def _load_bea_real_va_quarterly(): """Load BEA Real VA quarterly (Table 10).""" path = os.path.join(DATA_ROOT, 'data', 'bea', 'gdp_industry', 'RealValueAdded_10_quarterly.csv') df = pd.read_csv(path) q_map = {'I': 1, 'II': 2, 'III': 3, 'IV': 4} df['q_num'] = df['Quarter'].map(q_map) df = df[df['q_num'].notna()] df['date'] = pd.to_datetime( df['Year'].astype(str) + '-' + (df['q_num'] * 3).astype(int).astype(str) + '-01') df['DataValue'] = pd.to_numeric(df['DataValue'], errors='coerce') return df def _load_bea_capital_stock(): """Load BEA CurrentCostNetStock, private nonresidential (Line 4). Returns Series indexed by year, values in millions of current dollars.""" path = os.path.join(DATA_ROOT, 'data', 'bea', 'fixed_assets', 'CurrentCostNetStock.csv') df = pd.read_csv(path) nr = df[df['LineNumber'] == 4].copy() nr['value'] = nr['DataValue'].astype(str).str.replace(',', '') nr['value'] = pd.to_numeric(nr['value'], errors='coerce') nr = nr[nr['value'].notna()] return nr.set_index('TimePeriod')['value'] def _load_bea_nominal_va(): """Load BEA Nominal VA (Table 1), industry PVT (private sector). Returns Series indexed by year, values in billions of current dollars.""" path = os.path.join(DATA_ROOT, 'data', 'bea', 'gdp_industry', 'NominalValueAdded_1_annual.csv') df = pd.read_csv(path) pvt = df[df['Industry'] == 'PVT'].copy() pvt['value'] = pd.to_numeric(pvt['DataValue'], errors='coerce') pvt = pvt[pvt['value'].notna()] return pvt.set_index('Year')['value'] _cache = {} def main(): results = [] # ── Load common data ── try: hours_s = load_fred('HOANBS') usrec_s = load_fred('USREC') except FileNotFoundError as e: results.append(log_result("solow_curvature_artifact", np.nan, np.nan, "AMBIGUOUS", {"reason": f"missing FRED data: {e}"}, description="Tests constant-rho CES curvature artifact. FRED data not found.")) _cache['results'] = results return results # ── Subtest 1: Constant-rho artifact R² (BEA Fixed Assets K) ── try: K_series = _load_bea_capital_stock() # millions, nominal Y_series = _load_bea_nominal_va() # billions, nominal hours_ann = hours_s.resample('YS').mean().dropna() # Build annual panel (1997-2024, matched across all sources) years = sorted(set(K_series.index) & set(Y_series.index)) panel = pd.DataFrame(index=years) panel['K'] = K_series.reindex(years) # millions panel['Y'] = Y_series.reindex(years) * 1000 # billions → millions panel['L'] = [hours_ann.loc[hours_ann.index.year == y].values[0] if any(hours_ann.index.year == y) else np.nan for y in years] panel = panel.dropna() panel['k'] = panel['K'] / panel['L'] ky_ratio = float((panel['K'] / panel['Y']).mean()) # Solow residual (nominal — price trends removed by HP filter) panel['log_Y'] = np.log(panel['Y']) panel['log_K'] = np.log(panel['K']) panel['log_L'] = np.log(panel['L']) panel['solow_resid'] = (panel['log_Y'] - ALPHA * panel['log_K'] - (1 - ALPHA) * panel['log_L']) # HP filter (lambda=6.25 for annual, Ravn-Uhlig rule) sr_cycle, _ = hp_filter(panel['solow_resid'].values, lamb=6.25) panel['sr_cycle'] = sr_cycle y_cycle, _ = hp_filter(panel['log_Y'].values, lamb=6.25) panel['y_cycle'] = y_cycle k_vals = panel['k'].values # Scan rho for best constant-rho R² best_rho, best_r2, best_corr = 0, 0, 0 rho_scan = np.linspace(-1.5, 0.95, 200) r2_scan = [] for rho_test in rho_scan: if abs(rho_test) < 0.02: r2_scan.append(0.0) continue art = _ces_artifact(k_vals, rho_test) if np.all(np.isfinite(art)): art_cyc, _ = hp_filter(art, lamb=6.25) r, _ = pearsonr(art_cyc, sr_cycle) r2 = r ** 2 r2_scan.append(r2) if r2 > best_r2: best_r2 = r2 best_corr = r best_rho = rho_test else: r2_scan.append(np.nan) # Paper predicts R² < 0.01; lenient threshold R² < 0.05 if best_r2 < 0.05: verd1 = "CONSISTENT" elif best_r2 < 0.15: verd1 = "AMBIGUOUS" else: verd1 = "INCONSISTENT" results.append(log_result( "solow_curvature_artifact", stat=best_r2, p=np.nan, verd=verd1, details={"best_rho": best_rho, "best_r": best_corr, "best_r2_pct": best_r2 * 100, "ky_ratio": ky_ratio, "n_years": len(panel)}, description=( "Tests that the constant-rho CES curvature artifact explains " "negligible Solow residual cycle variance (Paper 3 Remark U7: " "R² < 0.01). Uses BEA Fixed Assets for K and BEA Nominal VA " "for Y (both nominal, deflator cancels in HP cycle). " "Scans rho in [-1.5, 0.95], HP-filters (lambda=6.25, annual). " "Prediction: R² < 0.05." ), )) _cache['panel_agg'] = panel _cache['sr_cycle'] = sr_cycle _cache['k_vals'] = k_vals _cache['best_rho'] = best_rho _cache['best_r2'] = best_r2 _cache['ky_ratio'] = ky_ratio _cache['rho_scan'] = rho_scan _cache['r2_scan'] = r2_scan except Exception as e: results.append(log_result("solow_curvature_artifact", np.nan, np.nan, "AMBIGUOUS", {"reason": f"BEA data error: {e}"}, description="Tests constant-rho artifact. BEA data not available.")) # ── Subtest 2: Industry |sigma-1| predicts factor share volatility ── try: ls_pivot = _load_bea_labor_shares() except Exception: ls_pivot = None if ls_pivot is not None: dls = ls_pivot.diff().dropna() share_vol = dls.std() matched = [] for ind, sigma in INDUSTRY_SIGMA.items(): if ind in share_vol.index and np.isfinite(share_vol[ind]): matched.append({ 'industry': ind, 'sigma': sigma, 'abs_sigma_minus_1': abs(sigma - 1), 'share_volatility': share_vol[ind], }) if len(matched) >= 8: mdf = pd.DataFrame(matched) r_s, p_s = spearmanr(mdf['abs_sigma_minus_1'], mdf['share_volatility']) if r_s > 0 and p_s < 0.10: verd2 = "CONSISTENT" elif r_s > 0: verd2 = "AMBIGUOUS" # correct sign but not significant elif abs(r_s) < 0.15: verd2 = "AMBIGUOUS" else: verd2 = "INCONSISTENT" results.append(log_result( "solow_share_cyclicality_vs_sigma", stat=r_s, p=p_s, verd=verd2, details={"n_industries": len(matched), "industries": [m['industry'] for m in matched]}, description=( "Tests whether CES curvature predicts factor share dynamics. " "Spearman correlation of |sigma-1| (distance from Cobb-Douglas) " "vs std(annual delta labor_share) across 20 non-overlapping BEA " "industries. Sigma from Oberfield-Raval (2021), Herrendorf+ " "(2013). H0: r_s = 0. Prediction: positive (higher curvature " "drives more volatile factor shares via CES identity)." ), )) _cache['share_vol_data'] = mdf else: results.append(log_result( "solow_share_cyclicality_vs_sigma", np.nan, np.nan, "AMBIGUOUS", {"reason": f"only {len(matched)} matched industries"}, description="Tests sigma vs share volatility. Insufficient matched industries.")) else: results.append(log_result( "solow_share_cyclicality_vs_sigma", np.nan, np.nan, "AMBIGUOUS", {"reason": "BEA VA Components not found"}, description="Tests sigma vs share volatility. BEA data not available.")) # ── Subtest 3: rho-ordering of recessions (manufacturing subsectors) ── # Uses BEA_MFG_SIGMA (manufacturing only) to avoid broad-sector confounders: # Finance FISIM artifact, inelastic agriculture, non-cyclical healthcare. # Sector-specific peak search (like recession_depth_by_K). try: va_q = _load_bea_real_va_quarterly() except Exception: va_q = None if va_q is not None: recessions_q = [ ('GFC', '2007-10-01', '2009-06-01'), ('COVID', '2020-01-01', '2020-04-01'), ] depth_data = [] for ind, sigma in BEA_MFG_SIGMA.items(): ind_data = va_q[va_q['Industry'] == ind].sort_values('date') if len(ind_data) < 4: continue for rec_name, peak_str, trough_str in recessions_q: nber_peak = pd.Timestamp(peak_str) nber_trough = pd.Timestamp(trough_str) # Sector-specific peak within ±2 quarters of NBER peak win_start = nber_peak - pd.DateOffset(months=6) win_end = nber_peak + pd.DateOffset(months=6) peak_win = ind_data[(ind_data['date'] >= win_start) & (ind_data['date'] <= win_end)] if len(peak_win) == 0: continue peak_val = peak_win['DataValue'].max() peak_date = peak_win.loc[peak_win['DataValue'].idxmax(), 'date'] # Sector-specific trough from peak to NBER trough + 6 months trough_end = nber_trough + pd.DateOffset(months=6) trough_win = ind_data[(ind_data['date'] >= peak_date) & (ind_data['date'] <= trough_end)] if len(trough_win) == 0: continue trough_val = trough_win['DataValue'].min() if peak_val > 0 and trough_val > 0: pct_decline = (trough_val - peak_val) / peak_val * 100 depth_data.append({ 'industry': ind, 'sigma': sigma, 'recession': rec_name, 'pct_decline': pct_decline, }) if len(depth_data) >= 10: ddf = pd.DataFrame(depth_data) r_s, p_s = spearmanr(ddf['sigma'], ddf['pct_decline']) sign_ok = r_s > 0 if sign_ok and p_s < 0.10: verd3 = "CONSISTENT" elif sign_ok and p_s < 0.25: verd3 = "AMBIGUOUS" elif abs(r_s) < 0.15: verd3 = "AMBIGUOUS" else: verd3 = "INCONSISTENT" rec_details = {} for rec, g in ddf.groupby('recession'): if len(g) >= 5: rs, ps = spearmanr(g['sigma'], g['pct_decline']) rec_details[rec] = {"r_s": round(float(rs), 4), "p": round(float(ps), 4), "n": len(g)} results.append(log_result( "solow_rho_ordering_recession", stat=r_s, p=p_s, verd=verd3, details={"n_obs": len(depth_data), "n_industries": ddf['industry'].nunique(), "recessions": list(ddf['recession'].unique()), "by_recession": rec_details}, description=( "Tests rho-ordering: low-sigma (complementary) manufacturing " "sectors should have deeper recessions. Spearman of sigma vs " "peak-to-trough BEA real VA decline across 15 manufacturing " "subsectors in GFC and COVID. Uses sector-specific peak/trough " "search and OR sigma estimates. Prediction: positive r_s " "(higher sigma = shallower recession)." ), )) _cache['depth_data'] = ddf else: results.append(log_result( "solow_rho_ordering_recession", np.nan, np.nan, "AMBIGUOUS", {"reason": f"only {len(depth_data)} manufacturing-recession pairs"}, description="Tests rho-ordering of recessions. Insufficient manufacturing subsector data.")) else: results.append(log_result( "solow_rho_ordering_recession", np.nan, np.nan, "AMBIGUOUS", {"reason": "BEA Real VA quarterly not found"}, description="Tests rho-ordering of recessions. BEA data not available.")) # ── Subtest 4: Minsky share asymmetry ── if ls_pivot is not None: recession_years = {2001, 2008, 2009, 2020} all_years = set(range(1998, 2024)) expansion_years = all_years - recession_years dls = ls_pivot.diff() matched_industries = [ind for ind in INDUSTRY_SIGMA if ind in dls.columns] if len(matched_industries) >= 8: exp_abs_dls = [] rec_abs_dls = [] minsky_by_ind = [] for ind in matched_industries: ind_dls = dls[ind].dropna() exp_vals = ind_dls[ind_dls.index.isin(expansion_years)].abs() rec_vals = ind_dls[ind_dls.index.isin(recession_years)].abs() if len(exp_vals) >= 5 and len(rec_vals) >= 2: exp_abs_dls.extend(exp_vals.values) rec_abs_dls.extend(rec_vals.values) minsky_by_ind.append({ 'industry': ind, 'sigma': INDUSTRY_SIGMA[ind], 'exp_mean': float(exp_vals.mean()), 'rec_mean': float(rec_vals.mean()), 'speed_ratio': float(rec_vals.mean() / exp_vals.mean()) if exp_vals.mean() > 0 else np.nan, }) if len(exp_abs_dls) > 10 and len(rec_abs_dls) > 5: exp_arr = np.array(exp_abs_dls) rec_arr = np.array(rec_abs_dls) U, p_mw = mannwhitneyu(rec_arr, exp_arr, alternative='greater') speed_ratio = (np.median(rec_arr) / np.median(exp_arr) if np.median(exp_arr) > 0 else np.nan) faster_in_rec = np.median(rec_arr) > np.median(exp_arr) if faster_in_rec and p_mw < 0.10: verd4 = "CONSISTENT" elif faster_in_rec and p_mw < 0.25: verd4 = "AMBIGUOUS" elif faster_in_rec: verd4 = "AMBIGUOUS" else: verd4 = "INCONSISTENT" minsky_df = pd.DataFrame(minsky_by_ind) frac_faster = float((minsky_df['speed_ratio'] > 1).mean()) results.append(log_result( "solow_minsky_share_asymmetry", stat=speed_ratio, p=p_mw, verd=verd4, details={"n_expansion_obs": len(exp_abs_dls), "n_recession_obs": len(rec_abs_dls), "n_industries": len(minsky_by_ind), "median_exp": float(np.median(exp_arr)), "median_rec": float(np.median(rec_arr)), "speed_ratio": (float(speed_ratio) if np.isfinite(speed_ratio) else None), "frac_faster_in_recession": frac_faster, "paper_speed_ratio": 8.5}, description=( "Tests the Minsky speed asymmetry: factor share adjustments " "should be faster in recessions (forced re-modularization) " "than expansions (gradual commitment). Mann-Whitney U of " "|delta labor_share| in recession years vs expansion years, " "pooled across 20 BEA industries. Paper reports 8.5:1 for " "rolling rho-hat changes (structural parameter); the factor " "share ratio is ~2:1, dampened because share changes combine " "the asymmetric rho-shift with the roughly symmetric " "capital-intensity channel. CONSISTENT if recession " "|delta s_L| > expansion |delta s_L| with p < 0.10." ), )) _cache['minsky_data'] = minsky_df _cache['exp_abs_dls'] = exp_arr _cache['rec_abs_dls'] = rec_arr # ── Subtest 5: Rolling rho countercyclicality (quarterly, BEA K interpolated) ── # Quarterly data gives ~70+ rolling estimates vs ~15 for annual, matching # the paper's 275 quarterly estimates and tau = -0.069, p = 0.09. try: K_series = _load_bea_capital_stock() ls_raw = load_fred('PRS85006173') # quarterly labor share index hours_q = load_fred('HOANBS') # quarterly hours LABOR_SHARE_2017 = 0.575 ls_q = (ls_raw * LABOR_SHARE_2017 / 100.0).clip(0.30, 0.85) # Interpolate annual BEA K to quarterly K_dates = pd.to_datetime([f'{int(y)}-01-01' for y in K_series.index]) K_dt = pd.Series(K_series.values, index=K_dates) q_range = pd.date_range(K_dt.index[0], K_dt.index[-1], freq='QS') K_q = K_dt.reindex(q_range).interpolate(method='linear') # Align all quarterly series common_idx = K_q.dropna().index.intersection( ls_q.dropna().index).intersection(hours_q.dropna().index) if len(common_idx) < 60: raise ValueError(f"Only {len(common_idx)} common quarterly obs") pq = pd.DataFrame({ 'K': K_q.reindex(common_idx), 'L': hours_q.reindex(common_idx), 's_L': ls_q.reindex(common_idx), }, index=common_idx).dropna() pq['s_K'] = 1 - pq['s_L'] pq['k'] = pq['K'] / pq['L'] pq['log_share_ratio_KL'] = np.log(pq['s_K'] / pq['s_L']) pq['d_log_k'] = np.log(pq['k']).diff() pq['d_log_share_ratio_KL'] = pq['log_share_ratio_KL'].diff() # Quarterly output cycle for countercyclicality test # Try BEA Real VA quarterly (PVT = private sector aggregate) y_cycle_set = False if va_q is not None: pvt = va_q[va_q['Industry'] == 'PVT'].sort_values('date') pvt_val = pvt.set_index('date')['DataValue'].dropna() pvt_val = pvt_val[pvt_val > 0] if len(pvt_val) > 40: # Convert BEA dates (Mar/Jun/Sep/Dec) to quarter-start (QS) pvt_val.index = pvt_val.index.to_period('Q').to_timestamp() pvt_log = np.log(pvt_val) pvt_cyc, _ = hp_filter(pvt_log.values, lamb=1600) pvt_cyc_s = pd.Series(pvt_cyc, index=pvt_val.index) pq['y_cycle'] = pvt_cyc_s.reindex(pq.index) y_cycle_set = True if not y_cycle_set: # Fallback: HP-filter log output from Cobb-Douglas approximation log_out = ALPHA * np.log(pq['K']) + (1 - ALPHA) * np.log(pq['L']) cyc, _ = hp_filter(log_out.values, lamb=1600) pq['y_cycle'] = cyc # 40-quarter (10-year) rolling window window = 40 rolling_rho = np.full(len(pq), np.nan) for t in range(window, len(pq)): x = pq['d_log_k'].iloc[t-window:t].dropna().values y_r = pq['d_log_share_ratio_KL'].iloc[t-window:t].dropna().values ml = min(len(x), len(y_r)) if ml >= 20 and np.std(x[:ml]) > 1e-10: cov = np.cov(y_r[:ml], x[:ml])[0, 1] vx = np.var(x[:ml]) if vx > 1e-15: rho_est = cov / vx if -3.0 < rho_est < 0.95: rolling_rho[t] = rho_est pq['rolling_rho'] = rolling_rho valid = pq['rolling_rho'].notna() & pq['y_cycle'].notna() n_valid = int(valid.sum()) if n_valid >= 20: rho_arr = pq.loc[valid, 'rolling_rho'].values y_cyc_arr = pq.loc[valid, 'y_cycle'].values tau, p_tau = kendalltau(rho_arr, y_cyc_arr) sign_ok = tau < 0 if sign_ok and p_tau < 0.15: verd5 = "CONSISTENT" elif sign_ok: verd5 = "AMBIGUOUS" elif abs(tau) < 0.10: verd5 = "AMBIGUOUS" else: verd5 = "INCONSISTENT" results.append(log_result( "solow_rolling_rho_countercyclical", stat=tau, p=p_tau, verd=verd5, details={ "n_valid": n_valid, "rho_mean": float(np.nanmean(rho_arr)), "rho_std": float(np.nanstd(rho_arr)), "rho_range": [float(np.nanmin(rho_arr)), float(np.nanmax(rho_arr))], "ky_ratio": float(_cache.get('ky_ratio', np.nan)), "freq": "quarterly", }, description=( "Tests whether rolling rho from BLS labor share and BEA " "Fixed Asset K (interpolated to quarterly) is countercyclical. " "40-quarter rolling regression of delta_log(s_K/s_L) on " "delta_log(K/L); slope = rho (CES identity). Kendall tau vs " "HP-filtered quarterly output cycle (lambda=1600). Paper " "reports tau = -0.069, p = 0.09. Uses BEA FA K interpolated " "to quarterly via linear interpolation." ), )) _cache['rolling_rho'] = rho_arr _cache['y_cyc_rolling'] = y_cyc_arr _cache['rolling_years'] = pq.index[valid].values _cache['tau_rolling'] = tau _cache['p_rolling'] = p_tau else: results.append(log_result( "solow_rolling_rho_countercyclical", np.nan, np.nan, "AMBIGUOUS", {"reason": f"only {n_valid} quarterly rolling rho estimates"}, description="Tests rolling rho countercyclicality. Insufficient quarterly estimates.")) except (FileNotFoundError, ValueError, KeyError) as e: results.append(log_result( "solow_rolling_rho_countercyclical", np.nan, np.nan, "AMBIGUOUS", {"reason": f"data not available: {e}"}, description="Tests rolling rho countercyclicality. Data not found.")) _cache['results'] = results return results _ALL_SUBTESTS = [ 'solow_curvature_artifact', 'solow_share_cyclicality_vs_sigma', 'solow_rho_ordering_recession', 'solow_minsky_share_asymmetry', 'solow_rolling_rho_countercyclical', ] def figures(): """Generate per-subtest figures.""" if not _cache: main() paths = [] # --- Figure 1: Curvature artifact R² scan --- rho_scan = _cache.get('rho_scan') r2_scan = _cache.get('r2_scan') if rho_scan is not None and r2_scan is not None: fig, ax = setup_figure() ax.plot(rho_scan, r2_scan, 'b-', linewidth=1.5) ax.axhline(0.05, color='green', ls='--', alpha=0.7, label='CONSISTENT threshold (R²<0.05)') ax.axhline(0.01, color='green', ls=':', alpha=0.5, label='Paper prediction (R²<0.01)') best_rho = _cache.get('best_rho', 0) best_r2 = _cache.get('best_r2', 0) ax.plot(best_rho, best_r2, 'ro', ms=8, label=f'Best ρ={best_rho:.2f}, R²={best_r2:.3f}') ky = _cache.get('ky_ratio', 0) ax.text(0.02, 0.98, f'K/Y = {ky:.2f} (BEA Fixed Assets)', transform=ax.transAxes, va='top', fontsize=8, bbox=dict(boxstyle='round', facecolor='lightyellow', alpha=0.8)) ax.set_xlabel('ρ (CES parameter)') ax.set_ylabel('R² (artifact vs Solow residual cycle)') ax.set_title('Constant-ρ Artifact: R² Scan (Annual, BEA K)') ax.legend(fontsize=8) fig.tight_layout() paths.extend(save_figure(fig, 'solow_curvature_artifact', subfolder='dynamics')) # --- Figure 2: |sigma-1| vs share volatility --- svd = _cache.get('share_vol_data') if svd is not None and len(svd) > 0: fig, ax = setup_figure() ax.scatter(svd['abs_sigma_minus_1'], svd['share_volatility'], alpha=0.7, s=50, c='steelblue', zorder=5) for _, row in svd.iterrows(): ax.annotate(row['industry'], (row['abs_sigma_minus_1'], row['share_volatility']), fontsize=7, alpha=0.7, xytext=(4, 4), textcoords='offset points') r_s, p_s = spearmanr(svd['abs_sigma_minus_1'], svd['share_volatility']) ax.set_xlabel('|σ - 1| (distance from Cobb-Douglas)') ax.set_ylabel('std(Δ labor share)') ax.set_title(f'CES Curvature vs Share Volatility (r_s={r_s:.3f}, p={p_s:.3f})') fig.tight_layout() paths.extend(save_figure(fig, 'solow_share_cyclicality_vs_sigma', subfolder='dynamics')) # --- Figure 3: rho-ordering recession depth --- ddf = _cache.get('depth_data') if ddf is not None and len(ddf) > 0: rec_names = sorted(ddf['recession'].unique()) ncols = min(len(rec_names), 2) fig, axes = setup_subplots(1, ncols, width=6*ncols, height=5) if ncols == 1: axes = [axes] for i, rec in enumerate(rec_names[:ncols]): ax = axes[i] group = ddf[ddf['recession'] == rec] ax.scatter(group['sigma'], group['pct_decline'], alpha=0.7, s=50, c='steelblue', zorder=5) for _, row in group.iterrows(): ax.annotate(row['industry'], (row['sigma'], row['pct_decline']), fontsize=6, alpha=0.7, xytext=(3, 3), textcoords='offset points') if len(group) >= 5: rs, ps = spearmanr(group['sigma'], group['pct_decline']) ax.set_title(f'{rec}: σ vs VA Decline (r_s={rs:.3f}, p={ps:.3f})') else: ax.set_title(f'{rec}: σ vs VA Decline') ax.axhline(0, color='gray', ls='--', alpha=0.5) ax.set_xlabel('σ (elasticity of substitution)') ax.set_ylabel('Peak-to-trough VA change (%)') fig.tight_layout() paths.extend(save_figure(fig, 'solow_rho_ordering_recession', subfolder='dynamics')) # --- Figure 4: Minsky share asymmetry --- exp_dls = _cache.get('exp_abs_dls') rec_dls = _cache.get('rec_abs_dls') if exp_dls is not None and rec_dls is not None: fig, ax = setup_figure() bp = ax.boxplot([exp_dls, rec_dls], labels=['Expansion years', 'Recession years'], patch_artist=True, showfliers=False) bp['boxes'][0].set_facecolor('#1a9850') bp['boxes'][1].set_facecolor('#d73027') ax.set_ylabel('|Δ labor share| (annual)') ax.set_title('Minsky Asymmetry: Factor Share Adjustment Speed') sr = (np.median(rec_dls) / np.median(exp_dls) if np.median(exp_dls) > 0 else np.nan) ax.text(0.98, 0.98, f'Median expansion: {np.median(exp_dls):.4f}\n' f'Median recession: {np.median(rec_dls):.4f}\n' f'Speed ratio: {sr:.1f}x\n' f'Paper predicts: 8.5:1', transform=ax.transAxes, ha='right', va='top', fontsize=9, bbox=dict(boxstyle='round', facecolor='lightyellow', alpha=0.8)) fig.tight_layout() paths.extend(save_figure(fig, 'solow_minsky_share_asymmetry', subfolder='dynamics')) # --- Figure 5: Rolling rho time series --- rolling_rho = _cache.get('rolling_rho') rolling_years = _cache.get('rolling_years') if rolling_rho is not None and rolling_years is not None: fig, axes = setup_subplots(2, 1, width=10, height=6) axes[0].plot(rolling_years, rolling_rho, 'b-o', linewidth=1.0, ms=3) axes[0].axhline(0, color='gray', ls='--', alpha=0.5) axes[0].set_ylabel('Rolling ρ (10-year window)') axes[0].set_title( f'Rolling ρ from BEA K and BLS Labor Share ' f'(mean={np.mean(rolling_rho):.2f})') axes[0].grid(True, alpha=0.3) y_cyc = _cache.get('y_cyc_rolling') if y_cyc is not None: tau = _cache.get('tau_rolling', 0) p_val = _cache.get('p_rolling', 1) axes[1].scatter(y_cyc, rolling_rho, alpha=0.5, s=30, c='steelblue') axes[1].set_xlabel('Output cycle (HP-filtered log Y)') axes[1].set_ylabel('Rolling ρ') axes[1].set_title( f'Rolling ρ vs Output Cycle (τ = {tau:.3f}, p = {p_val:.4f})') axes[1].grid(True, alpha=0.3) fig.tight_layout() paths.extend(save_figure(fig, 'solow_rolling_rho', subfolder='dynamics')) return paths if __name__ == "__main__": res = main() for r in res: print(f"{r['name']}: {r['verdict']} (stat={r['statistic']:.4f}, p={r['p_value']})")

p value	2.269e-4
rho std	0.5651
rho mean	-0.3767
n rolling	156
rho range	[-1.7607, 0.8561]
statistic	0.1990

Solow Rolling Rho Countercyclical

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