Research

Aggregate Reallocation Shocks, Occupational Employment and Distance

A unique general equilibrium model featuring many occupations and aggregate shocks is created to study occupational employment dynamics by imposing a correlated TFP structure across occupations along with distance between occupations. Productivity processes across occupations are correlated with similar occupations experiencing similar fluctuations. Mobility frictions and the correlated-productivity structure produce a systematic relationship between occupational employment correlations and occupational distance that does not arise when productivity processes are independent. Using employment data and measures of task-distance between occupations from the U.S. economy, a negative relationship between the correlation of occupational employment and task-distance separating occupation-pairs is uncovered.

Uncertainty Shocks, Learning From Prices and Costly Information Acquisition

A stylized model is presented in which individuals, who are interested in the realization of a latent macroeconomic fundamental, can either learn about the realization of the fundamental at a cost or make inference about its realization by observing prices. Assuming that lower probability events are more difficult to identify conditional on information acquisition effort, an equilibrium is constructed in which prices fully reveal the risk faced by individuals but only partially reveal the fundamental's realization. Posterior uncertainty regarding the fundamental is state dependent. No exogenous noise is injected into the price system to ensure existence of equilibria so there is no information externality - equilibrium is constrained efficient.

Published Work:

Wage Posting Without Commitment

(with Matthew Doyle, Review of Economic Dynamics, 2013 vol. 16, p.231-252)

This paper provides a theory of how a firm's inability to commit to pay exactly its advertised wage along with its inability to communicate the number of workers who have applied to each of its applicants may result in wage negotiations. Wage posting models of job search typically assume that firms can commit to paying workers exactly the posted wage. We relax this assumption and impose ``downward'' commitment; firms can commit only to paying at least their advertised wage. As each firm can only commit to pay at least their advertised wage, workers may demand that the firm pay more than the advertised wage. Competition across workers then determines their optimal wage demand strategies. In labour markets with a finite number of workers and firms, the strategic interaction between firms makes it costly for firms to provide applicants the incentive not to demand wages in excess of the advertised wage. In equilibrium, firms may settle for running job auctions at the cost of losing control of the number of applicants that they can attract. When this strategic interaction between firms vanishes, workers never choose to demand more than the advertised wage and there is no negotiation so a wage posting outcome obtains.

Information Acquisition, Dissemination and Transparency of Monetary Policy

(Canadian Journal of Economics, 2008 vol. 41, no. 1, p. 46-79)

A chief difficulty faced by central banks is to obtain an accurate measure of underlying macroeconomic conditions through observations of private sector economic behaviour and to simultaneously signal these conditions to imperfectly informed members of the private sector. This paper examines the role of transparency in a benevolent monetary authority's policies. Private sector agents may individually incur a cost of acquiring private information about the state of the economy and this private information may be incorporated into their actions. The policy authority attempts to infer the state of the economy from a noisy measure of aggregate private sector actions and makes a public announcement to inform the private sector of this inference. The policy authority faces a trade-off between informing the private sector of the state of the economy, and gathering information about the state of the economy. When the policy announcement is of very high quality, private sector agents have an incentive not to gather private information and to base their actions solely on information contained in the policy announcement. However, this makes the observed actions of the private sector less informative to the policy authority. The monetary authority should be vague about what it believes to be the state of the economy when doing so pushes a sizeable fraction of private sector agents into gathering information thereby making the policy signal more informative to those for whom it is relatively more costly to gather private information.

Work-In-Progress:

Relationships that Last: Job Creation vs Job Duration (with Britta Gehrke)

Older Work:

Aggregate Reallocation Shocks and the Dynamics of Occupational Mobility and Wage Inequality (Currently Dormant)

A theory of the joint dynamics between occupational mobility rates and wage inequality between the late 1970s through the early 2000s is proposed. The argument is based upon the timing of innovations to relative occupational total factor productivity and the costly reallocation of labour. It is proposed that major shocks occurred in the 1980s that resulted in an increase in wage inequality across the wage distribution along with a rise in the occupational mobility rate. The wage polarization phenomenon that was accompanied by a decrease in occupational mobility rates during the 1990s is argued to be the natural dynamics resulting from general equilibrium forces associated with continued labour reallocation due to the shocks of the 1980s.