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.
The Joint Dynamics of Labour and Capital with Matias Bayas-Erazo
Abstract: Models of lumpy capital adjustment are too responsive to interest rates relative to empirical evidence. We argue that allowing for small convex adjustment costs in labour can help these models better match the data. Convex costs cause labour to increase slowly in response to a shock thus smoothing out the impact on the marginal product of capital. Due to both depreciation and uncertainty over future productivity, this delay in the benefits of additional capital can have a large impact on the responsiveness of capital investment.
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.