Research

Publications and under revision

"Job Polarization, Labor Market Fluidity and the Flattening of the Price Phillips Curve" (joint with D. Siena) (The Economic Journal, Volume 134, Issue 661, July 2024)

Coverage: SUERF, BdF Eco-Notepad, PSE Macro-Days 2023 (video)

Abstract - This paper shows that job polarization -i.e. the disappearance of routine jobs- is changing the characteristics of the labor market. This has structural implications for the relationship between inflation and unemployment, the price Phillips Curve (PC). Using data from the European Monetary Union (EMU) and exploiting the fact that job polarization accelerates during recessions, we obtain two empirical results. First, countries experiencing a bigger shift in the occupational structure during a downturn exhibit a flatter PC afterward. Second, the occupational shifts experienced during the Great Recession and the Sovereign Debt Crisis explain up to a fourth of the flattening of the curve in the 2002-2018 period. Then, we reconcile this evidence through a New Keynesian model with unemployment and search and matching frictions. We show that increasing labor market fluidity -i.e. higher separation and hiring rate- decreases the slope of the PC. Using micro-data, we find that in the EMU non-routine jobs are more fluid. We conclude that job polarization flattened the PC.

"Share Buybacks, Monetary Policy and the Cost of Debt" (joint with A. Elgouacem) (International Journal of Central Banking - Volume 19, Number 2, June 2023)

Abstract - Share buybacks have become common practice across U.S corporations. This paper shows that firms finance these operations mostly through newly issued corporate bonds, and that the exogenous variation in the cost of debt due to innovations in monetary policy is key in explaining managers incentives to repurchase their own shares. Under our identification strategy, we find that firms are more likely to repurchase in periods of accommodative monetary policy when the yield on bond adjusts in the same direction. This behavior has macroeconomic implications as it exacerbates the crowding-out effect on investment and employment, thus reducing the transmission of monetary policy at establishment level. 

"Employment Protection Legislation Matters for the Phillips Curve" (joint with D. Siena) (Economics Letters - Volume 220,  October 2022, 110883.)

Abstract - Liberal reforms of employment protection legislation (EPL) aim at fostering the flexibility, dynamism and fluidity of the labor market without increasing unemployment. A New Keynesian model with search-and-matching frictions implies that such type of reforms have also a direct impact on the structural relationship between prices and unemployment, i.e. the Phillips Curve (PC). We assess empirically the existence of this channel considering 19 episodes of EPL reforms across 13 countries. Consistently with the theory, countries that experienced an employment protection liberalization witnessed a flattening of the PC just after the reform.

"Patents that Match your standards: Firm-level evidence on Competition, Innovation and Growth" (joint with A. Bergeaud and J. Schmidt) (R&R, Journal of Financial Economics)

Coverage: SUERF

Abstract - Standardization is a prerequisite for an industry to adopt a technology among competing ones. When a technology becomes the new standard, the firms that are leaders in producing this technology have a competitive advantage. Matching the semantic content of patents to standards and exploiting the exogenous timing of standardization, we show that firms closer to the new technological frontier increase their market share and sales. In addition, if they operate in a very competitive market, these firms also increase their R&D expenses and investment to escape future competition. 

"Global Value Chains and the Phillips Curve: a Challenge for Monetary Policy" (joint with A. Florio and D. Siena) (R&R, European Economic Review )

This paper studies how participation and position in Global Value Chains (GVCs) affect the slope of the Phillips Curve (PC) and, consequently, the ability of monetary policy to control inflation. Using data from the European Monetary Union (EMU) and value added measures of GVCs, we show that higher participation -- and not simply openness to trade-- leads to a flatter PC. This evidence is consistent with the theoretical literature emphasizing how globalization can reduce the sensitivity of prices to unemployment due to stronger strategic complementarities, to higher market power and to imperfect exchange rate pass-through. On the other hand, the role of GVC position is not statistically significant.

"Job Polarization, Skill Mismatch and the Great Recession" (R&R, Labour Economics)

Abstract - This paper shows that job polarization has a persistent negative effect on employment opportunities, labor mobility and skill-to-job match quality for mid/low-skilled workers, in particular during downturns. I introduce a model generating an endogenous mapping between skills and jobs, that I estimate to match solely occupational dynamics during the Great Recession, a major episode of polarization. Yet, this is sufficient for the model to replicate well the reallocation patterns of all workers on the job ladder and the mismatch dynamics observed in the data. Comparison with the planner solution reveals that 1/4 of mismatches is efficient and attenuates polarization and unemployment over the cycle. 

Working papers

"The Implications of Technological Standardization for the Value of the Firm" (joint with A. Bergeaud and J. Schmidt) [!!!NEW!!!   1st draft]

Technology standards are defined by national and international organizations to select and diffuse the best technologies and practices. By using a measure of patent quality and a new measure of semantic proximity of patents to standards' documents, this paper exploits the process of standardization to disentangle the different contribution of innovation and diffusion to the value of the firm. Producing a patent explains 0.8% increase in the book-value of the firm in the first 8 years following patent granting. Yet, such value deteriorates if the patent is not good enough to make it into a standard and diffuse. In fact, only firms whose patents' specific are included in a standards see their value increasing by an extra 0.5% afterwards. Similar results are found when looking at the market-value of the firm and its net-worth.

"When the Yield Goes Down: the Effects of Quantitative Easing at Firm Level" [Pdf upon request]

This paper studies how the interaction between unconventional monetary policy and firm heterogeneity affected the corporate yield curve in the aftermath of the Great Recession in the U.S. Despite an adjustment of the short-term yield across all firms, I show that only firms rich of cash and under-leveraged experienced a fall in the long-term cost of debt, with consequential increase in capital investments afterwards. I reconcile this evidence with a New Keynesian model where firms -heterogeneous in initial assets and productivity- can issue short-term and long-term bonds. Under precautionary saving behavior, the model replicates what observed in the data and reveals how the transmission of the unconventional monetary policy depends on the level of cash holdings and the initial distribution of assets. 

"Occupational Shortage and Labor Market Adjustments: a Theory of Islands" (joint with J.Tan) 

Abstract - Human Resources officers report occupational shortage to be the main cause of unfilled vacancies. Yet, it is not clear whether these are empty complaints or actually lead to effective wage and employment adjustments over time. By crossing data from the UK Employer Skill Survey with the UK Labor Force Survey, we show that shortage only leads to wage and employment adjustments for non-routine occupations in England, while no such adjustment occurs for routine occupations. This result is robust to several empirical specifications and varying levels of aggregation. Moreover, firms facing routine occupation shortage are more likely to outsource these vacancies, instead of raising wages or increasing recruitment intensity. In all, these results are consistent with the phenomenon of job polarization and the secular decline of the routine sector. To explore the likely mechanisms at play, we construct a stylized model of search and matching, where labor market islands are characterized by location and occupation types. We demonstrate how, when faced with local labor market shocks, wages in the skill-intensive non-routine sector increase more in response to shortage, thereby raising employment and mitigating the initial shortage, at the expense of the routine sector. 

"Low Inflation Recovery and Structural Changes in the Labor Market: evidence from the European Union"