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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?
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 ...
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 ...