Job Polarization and Structural Change
(Joint with Christian Siegel), 2017
Forthcoming American Economic Journal: Macroeconomics 2018 January

Job polarization is a widely documented phenomenon in developed countries since the 1980s: employment has been shifting from middle to low- and high-income workers, while average wage growth has been slower for middle-income workers than at both extremes. We show that polarization has started as early as the 1950-60s in the US, and that this process is closely linked to the shift from manufacturing to services. Based on these observations we propose a structural change driven explanation for polarization. In order to analyze not only the evolution of employment shares, but also of relative wages, we extend one of the standard frameworks of structural change by modeling the sectoral choice of workers in a Roy-type setup. Introducing this novel feature does remarkably well in matching the sectoral labor market outcomes over the past 50 years.


The Minimum Wage and Inequality, 2016
Journal of Labor Economics Part 1, 34(1): 237-274.

In the last 30 years wage inequality increased steeply while real minimum wages fell. In this paper I demonstrate that a general equilibrium model with endogenous skill choice is required to correctly evaluate the implications of minimum wage changes. The minimum wage not only truncates the wage distribution, but also affects skill prices and therefore changes the incentives that people face when making educational decisions. The calibrated model suggests – in line with recent empirical literature – that even though minimum wages affect the bottom end of the wage distribution more, their impact on the top end is significant as well.

Working Papers

Disentangling Occupation- and Sector-specific Technological Change (Joint with Christian Siegel), 2017

Occupational and sectoral labor market patterns display a significant overlap. This implies that economic models can explain these patterns to a large degree through either sector- or occupation-specific technological change, but stay silent about the level of specificity. We propose a model where technologies evolve at the sector-occupation level, allowing us to extract sector-only and occupation-only components and to quantify their importance. We find that most of productivity changes are occupation-specific, but that there is also a sizable sector component. We contrast the data and our baseline model against implications of models where technological change is restricted to be either at the sector or at the occupation
level, or both. All three restricted models can replicate both sectoral and occupational outcomes very well, but occupation-specific changes are crucial for within-sector changes of occupational employment and income shares.

Fertility, Longevity and International Capital Flows (Joint with Nicolas Coeurdacier and Stephane Guibaud), 2015

The neoclassical growth model predicts large capital flows towards fast-growing emerging countries. We show that incorporating fertility and longevity into a lifecycle model of savings changes the standard predictions when countries differ in their ability to borrow inter-temporally and across generations through social security. In this environment, global aging triggers capital flows from emerging to developed countries, and countries’ current account positions respond to growth adjusted by current and expected demographic composition. Data on international capital flows are broadly supportive of the theory. The fact that fast-growing emerging countries are also aging faster, while having less developed credit markets and pension systems, explains why they are more likely to export capital. Our quantitative multi-country overlapping generations model explains a significant fraction of the patterns of capital flows, across time and across developed and emerging countries.

Tax Schemes and Self-employment

I document that the probability of self-employment is strongly positively correlated with the tax rates that individuals face when employed, but is not correlated with the tax rates they face when self-employed. This, together with the vast evidence that it is mostly the self-employed who evade income taxes, suggests that when taxes on dependent employment income are high, more individuals choose self-employment in order to take advantage of the technology it offers in evading taxes. This in turn implies that this extensive margin of adjustment should be taken into account when considering the effects of tax rates on labor income, on taxable income and on welfare. I show that the welfare losses from higher taxes are underestimated when ignoring this margin.

paper coming soon slides

Work in Progress

Labor, Technological Advances and Schooling (Joint with Moshe Buchinsky)

Some Tax Evasion - More Redistribution: A Political Economy Model of Tax Evasion

Income Inequality and the Progressivity of Taxes in a Coalition Formation Model

Increasing Skill Premium and Skill Supply - Steady State Effects or Transition?