Search Results
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
(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. ...
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
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
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
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—excess unemployment from a mismatch between sectors where job seekers search for work and sectors where jobs are available—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery. We find that the mismatch index turned negative at the onset of the pandemic for the first time since 2000, suggesting that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more productive jobs, even at the expense of fewer hires. We show that sectoral differences in job ...
Working Paper
Automation, Market Concentration, and the Labor Share
Since the early 2000s, a rising share of production has been concentrated in a small number of superstar firms. We argue that the rise of automation technologies and the cross-sectional variation of robot use rates have contributed to the increases in industrial concentration. Motivated by empirical evidence, we build a general equilibrium model with heterogeneous firms, endogenous automation decisions, and variable markups. Firms choose between two types of technologies, one uses workers only and the other uses both workers and robots subject to an idiosyncratic fixed cost of robot ...
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 ...
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?
Newsletter
Has Covid-19 been a “reallocation recession”?
To answer the question in the title: Thus far, not dramatically so. In this Chicago Fed Letter, I document three facts supporting this conclusion. First, although the Covid period has seen multiple months with high rates of worker movement (reallocation) across industry sectors (relative to previous recessions), net cumulative reallocation from the onset of the pandemic through December 2020 is only the third highest among post-1945 recessions over the same horizon (and is only modestly outside the confidence bound for the average across those recessions). Thus, much of the reallocation ...