Research

Abstract: Real wages in the U.S. have become less pro-cyclical over the last several decades. This paper shows that the change in real wage cyclicality may be entirely accounted for by changes in cyclical composition effects. To explain this fact, I build a general equilibrium model in which workers have multidimensional heterogeneous skills for tasks which are subject to non-uniform labor demand shocks. A novel method to estimate the skill distribution reveals that skills have become more specific and heterogeneous, both of which push towards large composition effects. Compositional shifts offer a frictionless rationalization for representative agent labor supply shocks or movements in the labor wedge.

Abstract: We introduce dynamic incentive contracts into a model of inflation and unemployment dynamics. Our main result is that  wage cyclicality from incentives neither affects the slope of the Phillips curve for prices nor dampens unemployment dynamics. The impulse response of unemployment in economies with flexible, procyclical incentive pay is first-order equivalent to that of economies with rigid wages. Likewise, the slope of the Phillips curve is the same in both economies. This equivalence is due to effort fluctuations, which make marginal costs rigid even if wages are flexible. Our calibrated model suggests that 46% of the wage cyclicality in the data arises from incentives, with the remainder attributable to bargaining and outside options. A standard model without incentives calibrated to weakly procyclical wages matches the impulse response of unemployment in our incentive pay model calibrated to strongly procyclical wages.

We develop a framework to measure the welfare impact of inflationary shocks throughout the distribution. The first-order impact of a shock is summarized by the induced movements in agents’ feasible sets: their budget constraint and borrowing constraints. To measure this impact, we combine estimated impulse response functions with micro-data on household consumption bundles, asset holdings and labor income for different US households. Applying the framework, we find that inflationary oil shocks are regressive, but a monetary expansion is progressive. In both cases, the dominant channel is the effect of the shock on asset accumulation, not movements in goods prices or labor income.

Abstract: We examine the golden age of U.S. innovation by undertaking a major data collection exercise linking historical U.S. patents to state and county-level aggregates and matching inventors to Federal Censuses between 1880 and 1940. We identify a causal relationship between patented inventions and long-run economic growth and outline a basic framework for analyzing key macro and micro-level determinants. We find a positive relationship between innovation and drivers of regional performance including population density, financial development and geographic connectedness. We also explore the impact of social structure measured by slavery and religion. We then profile the characteristics of inventors and their life cycle finding that inventors were highly educated, positively selected through exit early in their careers, made time allocation decisions such as delayed marriage, and tended to migrate to places that were conducive to innovation. Father's income was positively correlated with becoming an inventor, though not when controlling for the child's education. We show there were strong financial returns to technological development. Finally, we document an inverted-U shaped relationship between inequality and innovation but also show that innovative places tended to be more socially mobile. Our new data help to address important questions related to innovation and long-run growth dynamics. 

Abstract: This paper theoretically and empirically studies the interaction of search and application approval in credit markets. Risky borrowers internalize the probability that their application is rejected and behave as if they had high search costs. Thus "overpayment" may be a poor proxy for consumer sophistication since it partly represents rational search in response to rejections. Contrary to standard search models, our model implies 1) endogenous adverse selection through the search and application approval process, 2) a possibly non-monotone or non-decreasing relationship between search and realized interest, default, and application approval rates and 3) search costs estimated from transaction prices alone are biased. We find support for the model's predictions using a unique dataset detailing search behavior of mortgage borrowers. Estimating the model, we find that screening is informative and search is costly. Counterfactual analyses reveal that tightening lending standards and discrimination through application rejection both increase equilibrium interest rates. This increase in realized interest rates is in part due to strategic complementarity in bank rate setting.

Abstract: This paper studies the effect of corporate and personal taxes on innovation in the United States over the twentieth century. We build a panel of the universe of inventors who patent since 1920, and a historical state-level corporate tax database with corporate tax rates and tax base information, which we link to existing data on state-level personal income taxes and on other economic outcomes. Our analysis focuses on the impact of personal and corporate income taxes on individual inventors (the micro level) and on states (the macro level), considering the quantity and quality of innovation, its location, and the share produced by the corporate rather than the non-corporate sector. We propose several identification strategies, all of which yield consistent results. We nd that higher taxes negatively impact the quantity and the location of innovation, but not average innovation quality. The state-level elasticities to taxes are large and consistent with the aggregation of the individual level responses of innovation produced and cross-state mobility. Corporate taxes tend to especially affect corporate inventors' innovation production and cross-state mobility. Personal income taxes significantly affect the quantity of innovation overall and the mobility of inventors.

Abstract: Using administrative payroll data from the largest U.S. payroll processing company, we measure the extent of nominal wage rigidity in the United States.   The data allow us to define a worker's per-period base contract wage separately from other forms of compensation such as overtime premiums and bonuses.  We provide evidence that firms use base wages to cyclically adjust the marginal cost of their workers.  Nominal base wage declines are much rarer than previously thought with only 2% of job-stayers receiving a nominal base wage cut during a given year. Approximately 35% of workers receive no base wage change year over year. We document strong evidence of both time and state dependence in nominal base wage adjustments.   In addition, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Collectively, our results can be used to discipline models of nominal wage rigidity.

Abstract: In this paper we show that the Pandemic Recession has led to frequent cuts in nominal wages. Within three months in 2020, as many wage cuts had occurred as occurred throughout the Great Recession. Unlike employment declines, wage cuts were concentrated at the top of the wage distribution. However, these cuts have been relatively short-lived, particularly among high-earners. Finally, wage cuts have been concentrated in firms which have seen large employment declines. Wage cuts appear to not be a substitute for cutting employment, at least when the shock to labor demand is this large.

Abstract: Using weekly, anonymized administrative payroll data from the largest U.S. payroll processing company, we measure the evolution of the U.S. labor market during the first three months of the global COVID-19 pandemic. After aggregate employment fell by 21 percent through late-April, we highlight a modest employment rebound through late-May. The re-opening of temporarily shuttered businesses contributed significantly to the employment rebound, particularly for smaller businesses. We show that worker recall has been an important component of recent employment gains for both re-opening and continuing businesses. Employment losses have been concentrated disproportionately among lower wage workers; as of late May employment for workers in the lowest wage quintile was still 30 percent lower relative to mid-February levels. As a result, average base wages increased by over 5 percent between February and May, though this increase arose entirely through a composition effect. Finally, we document that businesses have cut nominal wages for about 10 percent of continuing employees while forgoing regularly scheduled wage increases for others.

Abstract: This paper builds on the analysis in Akcigit, Grigsby, and Nicholas (2017) by using U.S. patent and Census data to examine macro and micro-level aspects of the relationship between immigration and innovation. We construct a measure of "foreign born expertise" and show that technology areas where immigrant inventors were prevalent between 1880 and 1940 experienced more patenting and citations between 1940 and 2000. We also show that immigrant inventors were more productive during their life cycle than native born inventors, although they received significantly lower levels of labor income than their native born counterparts. Overall, the contribution of foreign born inventors to US innovation was substantial, but we also find evidence of an immigrant inventor wage-gap that cannot be explained by differentials in productivity. 

Abstract: Young Americans are heavily reliant on debt and have clear financial literacy shortcomings. In this paper, we study the effects of exposure to financial training on debt outcomes in early adulthood among a large and representative sample of young Americans. Variation in exposure to financial training comes from statewide changes in high school graduation requirements. Using a flexible event study approach, we find that both mathematics and financial education, by and large, decrease reliance on nonstudent debt and improve repayment behavior. Economics training, on the other hand, increases both the likelihood of holding outstanding debt and the prevalence of repayment difficulties.