Research
In this paper, I argue that job polarization, the disappearing of middle wage occupations, can have long lasting effects in the U.S. wage structure. I suggest that, by changing the cross-cohort occupational structure, polarization can impact returns to experience and future wages. Firstly, I document that polarization has different impact across workers of different ages and education. Young workers disproportionally moved to low and high wage occupations in comparison to old workers, with significant differences between educational groups. Secondly, I document substantial heterogeneity in the level and growth of the returns to experience by occupation. Using an overlapping generations model with endogenous education and occupational choice, I show that if there exist complementarities between young and old labor, job polarization can affect the returns to experience. Quantitatively, I use the model to estimate the effect of technological and demographic changes in the U.S. wage structure accounting for the transition dynamics. During the transition, because of cohort imbalances and occupation switching costs, inequality is higher: college premium can be almost 10% higher than in the steady state and the relative wage of the median with respect to the top occupation is 12% worse. This culminates in a clear policy recommendation: the decrease of occupation switching costs, accelerating the transition and increasing wages of vulnerable groups.
“Trade-Induced Local Labor Market Shocks and Asymmetric Income Risk” (with Ursula M. Mello)
This paper investigates empirically the relationship between international trade and inequality in Brazil. In particular, we inspect how exogenous supply and demand shocks affect labor income risk in different regions between 2000 and 2012. Using a longitudinal administrative data set, we find considerable regional heterogeneity in the second and higher moments of the individual income growth distribution. Then, exploiting initial regional sectorial composition, we evaluate the impact of the increase in the Brazil-China trade flows on the dispersion, asymmetry and tails of these distributions. Results indicate that Chinese imports increase the dispersion of income risk. This effect is asymmetrical, since part of the effect comes from the growth of permanent negative shocks relatively to positive ones. The welfare losses of such an increase in risk can be substantial. Through the lens of an incomplete market model, an unborn individual would be willing to forgo up to 7.62% of his consumption to not be part of this riskier labor market.
“Occupation Mismatch and Wealth Inequality”
In this paper, I study the relationship between occupational mismatch and wealth inequality. Using the NLSY79 combined with occupational requirements from the ONET, I show that (i) there is a negative correlation between wealth and under match but no correlation for over match; (ii) this correlation is stronger for young individuals and (iii) under matched individuals have lower future earnings. I show that this is consistent with a life-cycle model with search and on-the-job human capital accumulation. Wealth-poor workers have shorter unemployment spells and accept jobs in mismatched occupations. Nevertheless, they have lower wage growth and lower lifetime income than their wealth-rich counterparts. This implies a trade-off between consumption insurance and higher future wage. Then, I discuss the implications of an increase in age-dependent unemployment benefits.
“Road Infrastructure and Productivity: Evidence from Mexico” (with Laura Jaramillo, Florian Misch, Christian Saborowski)
How large is the impact of new transport infrastructure on firms’ productivity? This paper aims to tackle this question by evaluating a large-scale effort to improve the federal highway network in Mexico. We do so by combining a novel dataset on road construction with two decades of municipality-level productivity data. Preliminary estimates suggest that improvements in the road network have positive effect on the productivity of the average firm but no effect on employment. We address endogeneity concerns by comparing actual road building with abandoned and delayed projects.