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Working Paper
(Re-)Connecting Inflation and the Labor Market: A Tale of Two Curves
We propose an empirical framework in which shocks to worker reallocation, aggregate activity, and labor supply drive the joint dynamics of labor market outcomes and inflation, and where reallocation shocks take two forms depending on whether they result from quits or from job loss. In order to link our approach with previous theoretical and empirical work, we extend the procedure for estimating a Bayesian sign-restricted VAR so that priors can be directly imposed on the VAR's impact matrix. We find that structural shocks that shift the Beveridge curve have different effects on inflation. ...
Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—employment losses relative to an efficient allocation where the planner can costlessly reallocate unemployed workers across sectors to maximize output—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery episode characterized by labor shortages. We find that, for the first time in our sample, mismatch unemployment turned negative at the onset of the pandemic. This result suggests that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more-productive jobs, ...
Working Paper
Financial Development and International Trade
This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with input-output linkages and heterogeneous firms subject to financial frictions. Industries differ in capital-intensity, which leads to differences in external finance dependence. The model is parameterized to match key features of firm-level data. Financial development leads to substantial reallocation of international trade shares from labor- to capital-intensive industries, with minor effects at the ...
Working Paper
Why Does Structural Change Accelerate in Recessions? The Credit Reallocation Channel.
The decline of the U.S. manufacturing share since 1960 has occurred disproportionately during recessions. Using evidence from two natural experiments—the collapse of Lehman Brothers in 2008 and U.S. interstate banking deregulation in the 1980s—I document a role for credit reallocation in explaining this phenomenon. Specifically, I show that losing access to credit disproportionately hurt manufacturing firms, and that the creation of new credit disproportionately benefited nonmanufacturing firms. These results arise endogenously from a model with technology-driven structural change and ...
Working Paper
Automation and the Rise of Superstar Firms
Using an instrumental variable approach, we document evidence that the rise in automation technology contributed to the rise of superstar firms. We explain this empirical link in a general equilibrium framework with heterogeneous firms and variable markups. Firms can operate a labor-only technology or, by paying a per-period fixed cost, an automation technology that uses both workers and robots. Given the fixed cost, larger and more productive firms are more likely to automate. Automation boosts labor productivity, enabling those large automating firms to expand further, and thus raising ...
Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—employment losses relative to an efficient allocation where the planner can costlessly reallocate unemployed workers across sectors to maximize output—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery episode characterized by labor shortages. We find that, for the first time in our sample, mismatch unemployment turned negative at the onset of the pandemic. This result suggests that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more-productive jobs, ...
Newsletter
Will the Covid-19 pandemic lead to job reallocation and persistent unemployment?
The Covid-19 pandemic has had an enormous impact on the U.S. economy. Nowhere are the effects more dramatic than in the labor market: In a span of just two months, the unemployment rate increased from 3.5% in February 2020—a low not seen since the late 1960s—to 14.7% in April—a high not seen since the Great Depression—before falling modestly in May and June. How persistent are these effects likely to be? Will the labor market recover quickly once pandemic-related restrictions are fully lifted, or will unemployment remain at elevated levels further into the future?
Report
Brand Reallocation and Market Concentration
We study the interaction of customer capital and productivity through brand reallocation across firms. We develop a firm dynamics model with brands as transferable customer capital, heterogeneous firm productivity, and variable markups. We study the matching process between transferable brand capital and core productivity, which can be inefficient with significant welfare implications. We link USPTO trademark data with Nielsen sales data to study the prevalence of brand reallocation and the response of sales and prices to reallocation. Quantitatively, brand reallocation reduces welfare. ...
Working Paper
Sectoral Shocks, Reallocation, and Labor Market Policies
Unemployment insurance and wage subsidies are key tools to support labor markets in recessions. We develop a multi-sector search and matching model with on-the-job human capital accumulation to study labor market policy responses to sector-specific shocks. Our calibration accounts for structural differences in labor markets between the United States and the euro area, including a lower job-finding rate in the latter. We use the model to evaluate unemployment insurance and wage subsidy policies in recessions of different duration. We find that, after a temporary sector-specific shock, ...
Working Paper
The Consequences of Medicare Pricing: An Explanation of Treatment Choice
Primary care physicians (PCPs) provide more specialty procedures in less-urban areas, where specialists are fewer. Using a structural random-coefficient model and the demographic and time variation in the data, this paper shows that changes in policy-set reimbursements lead to a reallocation of the suddenly-more-remunerative procedures away from specialists and toward PCPs, and this effect is stronger, the more rural an area is. A reimbursement-unit increase for a given procedure leads to outside-metro PCPs gaining 7-15% market share more than metro PCPs in that procedure, at the expense of ...