RESEARCH INTERESTS
Macroeconomics and International Trade
JOB MARKET PAPER
Equilibrium Unemployment: The Role of Discrimination(click to download)
With Juan Carlos Cordoba and Anni Isojarvi
U.S. labor markets are increasingly diverse and persistently unequal between genders, races/ethnicities, educational groups and age. In the spirit of Chari, Kehoe, and McGrattan (2007), we use a structural model approach to decompose the observed differences in labor market outcomes across demographic groups in terms of underlying wedges, or frictions. Of particular interest is the potential role of discrimination, either taste-based or statistical. Our prototype model is a version of the Diamond-Mortensen-Pissarides model extended to include a life cycle, learning by doing, a non-participation state, and informational frictions. The prototype exhibits group-specific wedges in initial human capital, returns to experience, matching efficiencies, and hazard rates. We use the model to reverse engineer group-specific wedges which we then feed back into the model to assess the fraction of various inequities they account for. Applying this methodology to 1998-2018 U.S. data reveals that differences in initial human capital, returns to experience, and in hazard rates, account for most of the demographic inequities; wedges in matching efficiencies play a secondary role. Our results suggest a minor aggregate impact of taste-based discrimination in hiring and an important role for statistical discrimination affecting particularly female groups and Black males. Our approach is macro, structural, uni˝ed, and comprehensive.
With Juan Carlos Cordoba and Anni Isojarvi
U.S. labor markets are increasingly diverse and persistently unequal between genders, races/ethnicities, educational groups and age. In the spirit of Chari, Kehoe, and McGrattan (2007), we use a structural model approach to decompose the observed differences in labor market outcomes across demographic groups in terms of underlying wedges, or frictions. Of particular interest is the potential role of discrimination, either taste-based or statistical. Our prototype model is a version of the Diamond-Mortensen-Pissarides model extended to include a life cycle, learning by doing, a non-participation state, and informational frictions. The prototype exhibits group-specific wedges in initial human capital, returns to experience, matching efficiencies, and hazard rates. We use the model to reverse engineer group-specific wedges which we then feed back into the model to assess the fraction of various inequities they account for. Applying this methodology to 1998-2018 U.S. data reveals that differences in initial human capital, returns to experience, and in hazard rates, account for most of the demographic inequities; wedges in matching efficiencies play a secondary role. Our results suggest a minor aggregate impact of taste-based discrimination in hiring and an important role for statistical discrimination affecting particularly female groups and Black males. Our approach is macro, structural, uni˝ed, and comprehensive.
WORKING PAPERS
Endogenous Bargaining Power and the Invisible Hand in DMP Economics(please email for a preliminary draft)
With Juan Carlos Cordoba and Anni Isojarvi
Efficient decentralized labor market allocations under Diamond-Mortensen-Pissarides model can be achieved when bargaining power equals the elasticity of vacancy finding rates, which is the well-known Hosios condition. But the question that why this condition should hold in a decentralized environment remains unanswered. We propose a mechanism as invisible hand which makes the efficient bargaining power arises endogenously in decentralized labor market. This paper also generalizes this efficient market condition of bargaining power under dynamic searching and matching model which learning by doing and skill erosion. In the calibration part, by introducing a more flexible CES matching function with endogenous bargaining power, we create bargaining power dynamics endogenously. The calibration results suggests the bargaining power gap between gender has converged while the workers as a whole are in a weaker bargaining status in U.S.
How Do Firms Respond to Political Tensions? Evidence from Chinese Food Importers(click here to download)
With Xibo Wan and Wendong Zhang
Political and economic tensions, which often jeopardize trade, are rising among the world’s major powers. Previous literature largely focuses on how brief, short-lived political tensions affect bilateral trade; however, little is known about firm-level trade responses to long-term political tensions. This paper investigates how firms respond to long-term political tensions by examining the Norway-China political tensions that lasted for six years. In particular, we use an event study approach to examine China's seafood importers' response to China's 2010 sanction on Norwegian fresh salmon after Norway awarded Liu Xiaobo, a Chinese political dissident, a Nobel Peace Prize. Our results reveal firm-level responses at both the extensive and intensive margins. At the intensive margin, firms that imported Norwegian fresh salmon before the sanction saw a dramatic and persistent 86% decline in their imports of fresh salmon products from Norway. At the extensive margin, we not only find a trade diversion effects of firms importing from other countries and fewer firms importing fresh salmon from Norway, but also a permanent "political hedging" effect with a decline in the maximum import share from any particular country, even if not Norway.
With Juan Carlos Cordoba and Anni Isojarvi
Efficient decentralized labor market allocations under Diamond-Mortensen-Pissarides model can be achieved when bargaining power equals the elasticity of vacancy finding rates, which is the well-known Hosios condition. But the question that why this condition should hold in a decentralized environment remains unanswered. We propose a mechanism as invisible hand which makes the efficient bargaining power arises endogenously in decentralized labor market. This paper also generalizes this efficient market condition of bargaining power under dynamic searching and matching model which learning by doing and skill erosion. In the calibration part, by introducing a more flexible CES matching function with endogenous bargaining power, we create bargaining power dynamics endogenously. The calibration results suggests the bargaining power gap between gender has converged while the workers as a whole are in a weaker bargaining status in U.S.
How Do Firms Respond to Political Tensions? Evidence from Chinese Food Importers(click here to download)
With Xibo Wan and Wendong Zhang
Political and economic tensions, which often jeopardize trade, are rising among the world’s major powers. Previous literature largely focuses on how brief, short-lived political tensions affect bilateral trade; however, little is known about firm-level trade responses to long-term political tensions. This paper investigates how firms respond to long-term political tensions by examining the Norway-China political tensions that lasted for six years. In particular, we use an event study approach to examine China's seafood importers' response to China's 2010 sanction on Norwegian fresh salmon after Norway awarded Liu Xiaobo, a Chinese political dissident, a Nobel Peace Prize. Our results reveal firm-level responses at both the extensive and intensive margins. At the intensive margin, firms that imported Norwegian fresh salmon before the sanction saw a dramatic and persistent 86% decline in their imports of fresh salmon products from Norway. At the extensive margin, we not only find a trade diversion effects of firms importing from other countries and fewer firms importing fresh salmon from Norway, but also a permanent "political hedging" effect with a decline in the maximum import share from any particular country, even if not Norway.
WORK IN PROGRESS
Granular Comparative Advantage: Evidence from Chinese Firms. With Gary Lyn and Wendong Zhang
Wage Stagnation, Robots and Endogenous Fertility. With Juan Carlos Cordoba and Xiying Liu
Trade and Labor Market Dynamics: General Equilibrium under Scale Effects and Agglomeration Effects. With Gary Lyn and Jiaming Mao
Wage Stagnation, Robots and Endogenous Fertility. With Juan Carlos Cordoba and Xiying Liu
Trade and Labor Market Dynamics: General Equilibrium under Scale Effects and Agglomeration Effects. With Gary Lyn and Jiaming Mao