Research

Publications:

"Firm Wage Differentials and Labor Market Sorting: Reconciling Theory and Evidence", (LINK)

(Journal of Political Economy, 2018, vol 126, issue 1, 313-346)

Why firms pay different wages? Empirical evidence suggests substantial differences in firm pay controlling for worker skill. Moreover, these differences are uncorrelated with skill suggesting the lack of sorting. Our first contribution is to show that the face value interpretation is inconsistent with evidence on coworker segregation. We interpret the evidence with a model of sorting and show that the correlation is biased. We isolate the reason for the bias in non-monotonicities in wages, and show that a measure of worker-coworker sorting is more accurate. The model explains many facts about labor markets, but misses some moments for the same reason as the bias.

This paper circulated with a previous title "Sorting in the Labor Market: Theory and Measurement". This is an amended version of the paper to include citations to the work of Gautier and Teulings (2006) in sorting with comparative advantage.

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Work in progress:

"Occupational Choice, Human Capital and Learning: a Multi-Armed Bandit Approach"

(2019) Joint work with Theodore Papageorgiou

Young workers, while employed in an occupation, accumulate human capital and also learn about their underlying productivity in that occupation. Human capital is partially transferable to other occupations and similarly the information acquired in one occupation is useful about the workers productivity in another occupation. Occupations differ in their rates of human capital accumulation and also the speed at which workers learn about their productivity. Workers with low tenure levels, as well as low paid workers are the ones most likely to switch occupations, consistent with our empirical findings. We introduce a model that includes these features, but remains tractable through the use of Gittins indices. We structurally estimate our setup focusing on the nine major occupational groups and decompose the relative importance of human capital and learning.

(a draft is available upon request)

"On the efficiency of tax and redistribution schemes"

(2021) Joint work with Sevi Rodriguez Mora, Ludo Visschers and Enric Martorell

As previously documented by Blundell et al., UK low income household face veryhigh marginal tax rates due to the potential loss of benefits. This trades higher insur-ance at the bottom of the earnings distribution against higher disincentives to work.Using UK data, we build and estimate a parametric tax function that accommodatesthese facts to review the Ramsey approach to optimal taxation. For that we use anincomplete markets heterogeneous agent model with labor supply decisions calibratedto mimic the UK economy. We revise the optimality of the current tax and transferssystem and alternative approaches to welfare support, from in-work tax credits like theEarned Income Tax Credit (EITC) in the US, to Universal Basic Income-like schemes

(a draft is available upon request)

"How Firms Affect Wages: a Structural Decomposition"

(2018)

(a draft is available upon request)

"Firm Heterogeneity, Sorting and the Minimum Wage", (LINK)

(2012)

In this paper, we show that firm heterogeneity and labor market sorting can help us understand a number of empirical facts, and aspects related to the political economy of minimum wages. We study a competitive economy with nontransferable utility, and preferences which depend on worker and firm types. Sorting in this environment can be induced by complementarities in productions or forces related to preferences. With firm heterogeneity, minimum wage increases affect workers above the minimum wage threshold, reducing wage inequality, increasing dispersion in firm profits and reducing the size of employment effects. It can also explain why such policies have political support, as workers above the threshold benefit from the policy.

"The Implications of Search Models for Wage Dynamics: an Empirical Assessment", (LINK)

(2007)

Job-search theory has been used successfully to explain cross-sectional patterns of wages and mobility patterns of workers. This paper confronts central implications of these models with a robust and pervasive fact: real wage cuts upon job-to-job transitions (JJT) are more frequent that for those remaining in one job. We provide two tests of the workhorse model of the related literature, both self-reliant of parametric assumptions. The resulting rejection suggests that wage cuts in JJT are not due to measurement error alone. We investigate these cuts further by examining the subsequent wage performance of these workers, concluding that this only explains the cuts of the highly educated.