Research
Working Papers
Skill Biased Reallocation (JMP) draft
Abstract: Workers displaced by the reallocation of labour demand across industries suffer persistent earnings losses, in a large part due to higher unemployment risk. This paper quantifies the aggregate unemployment implications of a reallocation of labour demand. I develop a search and matching model with multiple industries and industry specific skill that is calibrated to the US economy. In the model a reallocation shock leads to up to a 0.8 percentage points rise in unemployment. The combination of industry specific skill and the substitutability between workers of different skill levels are key to this result.
The Role of Demographics in Cross-Cohort Lifetime Income Differences with Laura Murphy
Abstract: We study how demographic changes in the US affect men’s lifetime incomes through career spillovers. American men’s lifetime median incomes have followed a hump shaped pattern: rising with each cohort entering the labour market from the late 1950s until the 1970s, and subsequently falling. The start of decline coincides with the entry of the baby boomers who represent a structural break in the size of incoming cohorts. The availability of higher-compensated management tasks increases with the number of lower ranked (younger) workers. So, a larger cohort of workers will increase (decrease) the opportunities of their predecessors(successors), in contrast to the symmetric effect predicted by traditional models. We utilize a simple model to show cross-cohort differences in promotions to higher rank jobs can account for the shape of lifetime median incomes observed in the data. We also show the promotion mechanism is consistent with several other cross-cohort empirical facts.
Heterogenous Firms and the Dynamics of Investment with Matias Bayas-Erazo
[Updated draft coming soon]
Abstract: We show that standard heterogeneous firm models of investment feature investment responses that decrease steadily after a shock as positive relationship between the magnitude of the initial response to a shock and the speed of convergence of capital. This is inconsistent with the hump shaped responses found in the data. To resolve this tension tension we add stochastic time to build to the standard model. This feature generates hump shaped responses and enables the model to match micro moments of investment as well as the response dynamics.
The Response to Shocks in (S,s) Models with Drift with Matias Bayas-Erazo
Abstract: Using recent advances in the study of partial differential equations, we provide an analytical characterisation of the impact of a shock in an (S,s) model with drift. This result has applications to studying inaction in models with menu costs and investment behaviour in models with fixed costs of investment.