Working Papers

Abstract: How does income taxation affect income inequality through entrepreneurship in the United States? I develop a spatial general equilibrium model in which individuals sequentially choose where to live and whether to become workers or entrepreneurs. Each state is characterized by exogenous amenities, business and labor tax rates, and a productivity distribution that captures how productive its residents tend to be, reflecting the local productivity and economic opportunities. Higher tax rates make states less attractive, all else equal, negatively affecting state population size and suppressing the total number of firms. Consistent with the data, the model predicts negative relationships between business tax rates and entrepreneurship rates, as well as between entrepreneurship rates and income inequality. I find that differences in business taxation account for 4.4% and 2.8% of the observed cross-state variation in entrepreneurship and the pretax Gini coefficient, respectively, with the remainder driven by heterogeneity in state productivity distributions. The calibrated model highlights that ignoring endogenous occupational choice understates the effects of business tax harmonization on aggregate productivity, wages, and output, and overstates its impact on income inequality. A Gini decomposition shows that tax harmonization mainly impacts inequality by shifting the share of entrepreneurs rather than altering within-group inequality in each occupational category.

Abstract: The post-pandemic labor market featured a persistent increase in remote work arrangements. We ask whether this re-valuation of work is mostly due to a shift in worker preferences for flexibility or advances in technology that make remote work more feasible. We develop and estimate a general equilibrium search model featuring heterogeneity in worker skill and idiosyncratic worker tastes. A key innovation is our novel, continuous measure of occupational teleworkability, which allows the model to capture rich heterogeneity in remote-work potential across firms and occupations. We estimate the model's deep parameters via the Simulated Method of Moments (SMM), disciplined by rich microdata from two distinct periods: 2019 (pre-pandemic) and 2024 (post-pandemic). Our analysis reveals that the shift is overwhelmingly driven by a profound revaluation of in-office time by workers. A structural decomposition shows that this preference shock accounts for 56.8% of the total increase in the average share of remote work, while concurrent shocks to remote work technology account for 33.0% of the shift.

Published Papers