Job market paper
Firm and Worker Dynamics in an Aging Labor Market
I assess the impact of aging of the labor force on business dynamism, labor market fluidity and economic growth. The analysis embeds endogenous growth through creative destruction in an equilibrium job ladder model, highlighting feedback between the extent of mismatch in the labor market and incentives to innovate. I calibrate the model to aggregate reallocation rates and show that the theory replicates life cycle firm and worker dynamics in the data. The model implies that labor force aging over the last 30 years in the U.S. explains 40–50 percent of the decline in job and worker reallocation and has reduced annual economic growth by 0.3 percentage points. Using cross-state variation and instrumenting for the incidence of aging using lagged age shares, I find additional empirical support for the prediction of large effects of aging on dynamism and growth.
Firms and the Decline in Earnings Inequality in Brazil
American Economic Journal: Macroeconomics (2018), 10(1): 149–189
with Jorge Alvarez, Felipe Benguria, and Christian Moser
We document a large decline in earnings inequality in Brazil between 1996 and 2012. Using administrative linked employer-employee data, we fit high-dimensional worker and firm fixed effects models to identify the sources of this decline. Firm effects account for 45 percent of the total decline and worker effects for 24 percent. While pay-relevant firm and worker characteristics became more dispersed over the period, the inequality decline is driven by falling returns in pay to these variables. We conclude that changes in pay policies, rather than changes in firm and worker fundamentals, played a significant role in Brazil’s inequality decline.
Returns to Education through Access to Higher-Paying Firms: Evidence from US Matched Employer-Employee Data
American Economic Review: Papers and Proceedings (2017), 107(5): 374–378
with Christian Moser
What are the sources of the returns to education? We study the allocation of higher education graduates from public institutions in Ohio across firms. We present three results. First, we confirm findings in the earlier literature of large pay differences across degrees. Second, we show that up to one quarter of pay premiums for higher degrees are explained by between-firm pay differences. Third, higher education degrees are associated with greater representation at the best-paying firms. We conclude that employer heterogeneity is an important factor in mediating the returns to education.
Worker Flows and Wage Growth over the Life-Cycle: A Cross-Country Analysis
Using panel data for 1990–2014 from 12 OECD countries, I document three facts about cross country labor market outcomes. First, worker flows and life-cycle wage growth differ substantially across countries. Second, the fluidity of a country’s labor market covaries positively with life-cycle wage growth of its workers. Third, the direct effect of job shopping accounts for only a quarter of this covariation. I build an equilibrium life-cycle model of the labor market that features search and human capital accumulation on the job, showing that a faster rate of climbing the job ladder increases incentives to accumulate human capital. A calibrated version of the model suggests that differences in the cost to firms of hiring may account for the empirical covariation between fluidity and wage growth and fluidity and output per capita, and 43–45 percent of the overall variation in these measures across countries.
Earnings Inequality and the Minimum Wage: Evidence from Brazil
CESifo Working Paper Series No. 6393
with Christian Moser
We quantify the effect of a minimum wage on compression throughout the earnings distribution. Using the case of Brazil, which experienced a large decrease in earnings inequality while its real minimum wage increased from 1996–2012, we document that the inequality decrease was bottom-driven yet widespread, with compression up to the 75th earnings percentile. We develop an equilibrium search model with heterogeneous firms and workers and find that effects of the minimum wage are consistent with the above facts, explaining 70 percent of the observed inequality decrease, with half of the decrease due to spillovers further up the earnings distribution.
The German Labor Market Reforms and Post-Unemployment Earnings
IMF Working Paper WP/15/162
with Enrica Detragiache and Faezeh Raei
In 2003–05, Germany undertook extensive labor market reforms which were followed by a large and persistent decline in unemployment. Key elements of the reforms were a drastic cut in benefits for the long-term unemployed and tighter job search and acceptance obligations. Using a large confidential data set from the German social security administration, we find that the reforms were associated with a fall in the earnings of workers returning to work from short-term unemployment relative to workers in long-term employment of about 10 percent. We interpret this as evidence that the reforms strengthened incentives to return to work but, in doing so, they adversely affected post re-entry earnings.