Search Results
Working Paper
Organizations, Skills, and Wage Inequality
We extend an on-the-job search framework in order to allow firms to hire workers with different skills and skills to interact with firms? total factor productivity (TFP). Our model implies that more productive firms are larger, pay higher wages, and hire more workers at all skill levels and proportionately more at higher skill types, matching key stylized facts. We calibrate the model using five educational attainment levels as proxies for skills and estimate nonparametrically firm-skill output from the wage distributions for different educational levels. We consider two periods in time (1985 ...
Working Paper
Estimating the Trend Unemployment Rate in the Fourth Federal Reserve District
We estimate trend unemployment rates for Ohio, Pennsylvania, Kentucky, and West Virginia, states that span parts of the Fourth District of the Federal Reserve System. Our estimated unemployment rate trend for the District as a whole stood at 5.7 percent in 2020:Q1 compared to a 4.7 percent observed unemployment rate within the District, implying a tight labor market by historical standards.
Working Paper
Are Supply Networks Efficiently Resilient?
We show that supply networks are inefficiently, and insufficiently, resilient. Upstream firms can expand their production capacity to hedge againstsupply and demand shocks. But the social benefits of such investments arenot internalized due to market power and market incompleteness. Upstreamfirms under-invest in capacity and resilience, passing-on the costs to downstreamfirms, and drive trade excessively towards the spot markets. There isa wedge between the market solution and a constrained optimal benchmark,which persists even without rare and large shocks. Policies designed to incentivize ...
Working Paper
Large and Small Sellers: A Theory of Equilibrium Price Dispersion with Sequential Search
The paper studies equilibrium pricing in a product market for an indivisible good where buyers search for sellers. Buyers search sequentially for sellers but do not meet every seller with the same probability. Specifically, a fraction of the buyers' meetings lead to one particular large seller, while the remaining meetings lead to one of a continuum of small sellers. In this environment, the small sellers would like to set a price that makes the buyers indifferent between purchasing the good and searching for another seller. The large seller would like to price the small sellers out of the ...
Speech
Opening remarks at the Workshop on Reforming Culture and Behavior in the Financial Services Industry.
Remarks at the Workshop on Reforming Culture and Behavior in the Financial Services Industry, Federal Reserve Bank of New York, New York City.
Working Paper
Creative Destruction and the Reallocation of Capital in Rural and Urban Areas
We test the implications of Schumpeter’s theory of creative destruction on food manufacturer births and deaths using a dynamic, unobserved effects count model with correlated random effects. We find evidence of a creative destruction process via the interaction of previous firm birth and death, which is correlated with higher rates of contemporaneous firm birth and death in a given location. Results support Marshall’s notion of “something is in the air,” as evidenced by the strong correlation between sources of unobserved heterogeneity in the birth and death processes. Consistent with ...
Speech
Opening remarks at reforming culture and behavior in the financial services industry: workshop on progress and challenges
Opening Remarks at Reforming Culture and Behavior in the Financial Services Industry: Workshop on Progress and Challenges, Federal Reserve Bank of New York, New York City.
Working Paper
Financial development and long-run volatility trends
Countries with more developed financial markets tend to have significantly lower aggregate volatility. This relationship is also highly non-linear starting from a low level of financial development the reduction in aggregate volatility is far more significant with respect to financial deepening than when the financial market is more developed. We build a fully-edged heterogeneous-agent model with an endogenous financial market of private credit and debt to rationalize these stylized facts. We show how financial development that promotes better credit allocations under more relaxed borrowing ...
Working Paper
Endogenous firm competition and the cyclicality of markups
The cyclicality of markups is crucial to understanding the propagation of shocks and the size of multipliers. I show that the degree of inertia in the response of output to shocks can reverse the cyclicality of markups within implicit collusion and customer-base models. In both classes of models, markups follow a forward looking law of motion in which they depend on firms' conditional expectations over stochastic discount rates and changes in output, implying that auxiliary assumptions that affect the inertia of output can potentially reverse cyclicality of markups in each of these models. I ...
Working Paper
Firms, Skills, and Wage Inequality
We present a model with search frictions and heterogeneous agents that allows us to decompose the overall increase in US wage inequality in the last 30 years into its within- and between-firm and skill components. We calibrate the model to evaluate how much of the overall rise in wage inequality and its components is explained by different channels. Output distribution per firm-skill pair more than accounts for the observed increase over this period. Parametric identification implies that the worker-specific component is responsible for 85 percent of this, compared to 15 percent that is ...