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Research
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The Skill Premium Puzzle in Portugal
Abstract: This paper examines the evolution of the skill premium in Portugal. Using a comprehensive employer-employee dataset, I document that between 1995 and 2021, the skill premium declined by 31 percent, in stark contrast to the sustained rise observed in the United States. I apply a quantitative macroeconomic model to interpret the data and explore the driving forces behind this fall. The model successfully captures both the decline in the skill premium and the long-term fall in the labor share. The increase in the supply of skilled labor alone explains the entire decline in the skill premium, which outweighed the positive impact of capital-skill complementarity on the wages of skilled workers. The estimates suggest a lower substitutability between skilled and unskilled labor in Portugal relative to the United States, and a higher complementarity between skilled labor and capital equipment. This paper broadens the understanding of skill-biased technological change and offers insights for policymakers concerned with inequality and shifting labor dynamics.
Work in Progress
Automation and Aggregate Shocks (draft available upon request)
Abstract: I study the importance of aggregate shocks, such as demand and technology shocks, for firms’ automation decisions. By directly affecting the relative factor prices, such shocks pin down how intensively capital and labor are used in production. We show that permanent and persistent demand shocks can successfully change the steady state of the economy, whereas the impact of temporary shocks depends crucially on their magnitude and length. Technology shocks can also successfully shift the automation level of the economy, where the speed of adjustment is inversely proportional to the magnitude of the shock. I also compare the impact of these shocks with inelastic and elastic labor supply, and conclude that the impact of these shocks is stronger in the latter case.
Wage Inequality in Portugal: Anatomy of a Fall
with Manuel Cruz
Abstract: Wage inequality in Portugal has fallen substantially since 2005, in contrast with the patterns observed in other advanced economies. Using a matched employer-employee dataset spanning the entire set of workers in the Portuguese private sector, we investigate the determinants of this convergence and the role played by firms. We document that 80% of the drop in wage variation was driven by a reduction in between-firms inequality. At the same time, we find that wage variance fell along the entire distribution of workers, while the firm pay distribution compressed mostly at the bottom 50%. Estimating an Abowd-Kramarz-Margolis (AKM) model, we find that 34% of the total decrease in wage variance can be accounted for by a reduction of the variance of worker effects, 20% by a reduction of the variance of firm effects and 24% by a reduction of the degree of sorting of high pay workers to high pay firms. We then discuss the potential role that minimum wage hikes might have played.
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