Macro Labor
Models of random search on the job make clear predictions about the expected wage premium: the premium or discount in pay that workers should anticipate in their next job offer relative to their current wage. Using survey data, I document empirical facts about the expected wage premium, and I show that, as predicted by classic models of random job search: (a) the average expected wage premium is negative (a discount), and (b) it decreases with job tenure. However, these models cannot reconcile two observed empirical patterns: the substantial dispersion in expected wage premium, which suggests a sizable ladder of job opportunities workers can climb, and the small magnitude of the average expected discount, which indicates that wage gains from climbing this ladder are modest. I propose a model that can reconcile these facts, featuring: (i) productivity gains that are not immediately reflected in the wages of employed workers, and (ii) reallocation events in which workers move jobs for reasons other than wage gains. When calibrated to match these new empirical facts, the proposed model predicts less wage growth and lower wage inequality from job search and search frictions than classic models of random job search.
Households' beliefs about the macroeconomy are excessively volatile, while workers' beliefs regarding their own labor market prospects are notably stable. In this paper, I formally investigate how changes in households' beliefs about the macroeconomy affect their expectations regarding labor market outcomes. Using the Michigan Consumer Sentiment Index as a proxy for households' beliefs about the state of the economy, I employ a VAR model to show that newly negotiated wages respond very slowly to shifts in households' expectations about the economy. Turning to microdata on consumer expectations, I find no evidence that workers' expectations about the macroeconomy significantly influence (i) their expectations about wages for future job offers, (ii) their reservation wage, or (iii) the number of job offers they expect to receive in the near future.
Macro Development
Using plant level data from the Annual survey of industries (ASI) we document that TFP losses from misallocation due to financial friction (dispersion in borrowing costs) in Indian manufactory sector ranged between 7%-12.5% in 2014. Estimated losses were significantly higher in 1998 (7.9%-15.6%) but were slightly lower in 2004, which indicates a halt in the process of reducing financial friction in the Indian market.