In the last few decades, dramatic changes have been documented in the business landscape in the US, including rising productivity dispersion between firms, higher aggregate markups, the growing dominance of big companies, a fall in the labor share of GDP and declining business dynamism. In this paper we address several questions: (i) why should we care about such trends in firm inequality? (ii) have similar trends been occurring in the UK? (iii) What are the explanations for these trends and (iv) what, if any, should be the policy responses? We conclude that most of the same empirical trends seen in the US have occurred in Britain since the mid-1990s. There has been an increase in dispersion of firm productivity, wages profit markups and labour shares. At the macro level, the UK had little productivity growth since Global Financial Crisis 2008-09, this has been a drag on median and mean real wages which had barely recovered to pre-crisis levels by the start of the COVID Pandemic. Aggregate profit markups have risen, and labor shares of GDP have fallen since 1980 (although less clearly than the US). We argue that the most likely explanations of the trends are related to fundamental forces of technology and globalization rather than country-specific institutions.

Field experiments show that employers are less likely to consider long-term unemployed job-seekers for interviews. In this paper, we study how firms' screening behaviour affects the optimal design of unemployment insurance (UI). We build a model of the job search and recruitment process in which firms have limited information about the productivity of each applicant and make interviewing and hiring decisions based on unemployment duration and a noisy signal about productivity. We estimate our model using German data and study optimal two-tier unemployment systems. In the estimated screening model, the optimal initial benefit level is four percentage points higher and paid for eight months longer compared to the full information benchmark. We use an extended Baily-Chetty formula to study the mechanisms behind this result: the introduction of screening affects workers' search incentives and consumption and thereby moral hazard costs and the consumption smoothing gain. In addition, in the screening model, raising benefits indirectly raises firms' hiring probabilities of the long-term unemployed, which we find is primarily driven by better beliefs over their productivity. This has an externality effect on welfare, which plays a significant role in our policy analysis. Finally, we conduct a welfare analysis of who gains and loses when the government takes screening into account when deciding about the optimal schedule and find significant distributional welfare effects.

A common approach to analysing inequality focuses on household income and assumes the absence of intra-household inequality and homogenous equivalence scales. To study the role of these aspects, I build a model of household decision-making and the marriage market. The model jointly captures consumption inequality within families, the allocation of time between work, leisure and home production and population-wide preference heterogeneity, and allows me to measure individual well-being in terms of the Money-Metric Welfare Index (MMWI, Chiappori & Meghir (2015)). I estimate the model using British data and find that the rank correlation between household income and the MMWI is only 0.49, suggesting that household income is an imperfect measure of well-being. Intra-household inequality accounts for 22% of overall welfare inequality and heterogeneity in economies of scale across families accounts for 15%. To conclude, I illustrate the policy relevance of individual welfare measures by studying how minimum wage increases affect poverty in terms of the MMWI.

We examine why U.S. college-educated couples with children marry rather than cohabit and the implications for children's development. Marriage offers lower separation risk and equal asset division, benefiting the lower-earning spouse. This arrangement encourages married women to invest more time and money in children, thereby increasing their chances of college completion. Using an OLG model with marriage, cohabitation, wealth accumulation, and educational investments, we find that the higher insurance value of marriage for college-educated couples increases marriage rates, thus elevating college completion rates for their children. Insurance through marriage is particularly important when investing in children is very costly.

We investigate how job loss affects the characteristics of women that displaced men match with, and study implications for theories of search, matching, and sorting in the marriage market. Leveraging quasi-experimental variation from Danish establishment closures, we find that displaced men on average remarry women who outearn their previous partners, relative to an untreated control group. It is challenging to reconcile this finding with the positive empirical correlation between spouses’ incomes in standard models of marriage market matching. To realign theory and empirical evidence, we propose a multidimensional model in which sorting on income is negative, but a positive correlation between spouses' incomes arises spuriously, driven by unobserved characteristics. We highlight the policy relevance of our findings by contrasting the impact of simulated tax reforms on marital sorting and income inequality in one-dimensional and multidimensional models.

Goldin (2014) highlights the role of differences in hours flexibility across occupations as a source of gender wage inequality. How does the tax system - in terms of jointness and progressivity - affect occupational choice, work hours and wages across occupations and the gender wage gap? We study these questions in a model of occupational choice and labour supply. The decision to work in the high-wage/high-hours occupation depends on the earnings gain from being in that occupation and the cost of having less leisure time. Taxation affects both the gain and cost of this trade-off and therefore has ambiguous effects. Calibrating the model to US data, we find that the impact of (1) introducing individual taxation and (2) removing tax progressivity via a flat tax on occupational choice is relatively small: the share of women working in the long-hours occupation increases by at most 0.7pp. By contrast, endogenous wages, due to the positive impact long work hours have on wages, play an important role in amplifying the effects of tax reforms. Changes in wages account for between 15-50% of the elasticity of taxable income of the tax reforms.

This paper studies how the progressivity of the income tax affects intra-household inequality and the marriage market. Tax progressivity increases the after-tax earnings of the lower-earning spouse and improves their bargaining position in marriage. This mechanism reduces inequality in consumption and leisure within households. In addition, tax progressivity can change who is single and who marries whom. I study these effects in an equilibrium search and matching model with intra-household bargaining, labor supply and savings. The model is calibrated to data from the Netherlands and used to study a hypothetical reform which increases progressivity by 40% relative to the current system. The reduction of intra-household inequality accounts for 24.77% of the reduction in inequality in private consumption due to the reform, and 11.43% of the reduction in inequality in welfare from private and public consumption, leisure and home production. Changes in the composition of couples and singles, due to endogenous marriage and divorce, have small implications for inequality