Papers

Business Cycles and Household Heterogeneity:
Aggregate Effects of Minimum Wage Regulation at the Zero Lower Bound
Accepted, Journal of Monetary Economics
SSRN
Intergenerational Redistribution in the Great Recession
(with Jonathan Heathcote, Dirk Krueger, and Jose Victor Rios Rull)
NBER, SSRN
2nd R&R, Journal of Political Economy
Consumer Credit:
Employer Credit Checks: Poverty Traps versus Matching Efficiency
(with Dean Corbae) 
NBER WP 25005
Under Review, 9/4/2018
The Unintended Consequences of Employer Credit Check Bans in Labor and Credit Markets 
with Kristle Cortés and Murat Tasci​
Opportunity & Inclusive Growth WP, SSRN, LEHD SCRIPT
Submitted
A Simple Dynamic Theory of Credit Scores Under Adverse Selection 
(with Dean Corbae)
Labor's Share of Income:
Demographic Origins of the Decline in Labor's Share
​with Jacob Short
Submitted
(Previously circulated as "The Life-Cycle Distribution of Earnings and Decline in Labor's Share")

​Can Capital Deepening Explain the Global Decline in Labor's Share?
with Jacob Short​
SSRN
Under Review

In Progress:

Minimum Wages as Equilibrium Selection in an Expectations-Driven Liquidity Trap
*Very Early Draft*

A sufficiently high real minimum wage policy eliminates liquidity trap equilibria in the sticky-price New Keynesian model by putting a lower bound on deflation expectations. However, there is a tradeoff between economic stability and allocative efficiency, because the minimum wage shifts labor demand from low to high productivity workers. The minimum wage’s effects are non-monotonic: a sufficiently high minimum wage eliminates the liquidity trap, whereas a low value actually makes it worse. Finally, higher real minimum wages are associated with higher inflation expectations in cross-sectional data, consistent with the theory.




A Quantitative Rat Race Theory of Labor Market Dynamics

A fundamental puzzle for productivity driven business cycle theories is that labor productivity and hours are negatively correlated. I refine the empirical puzzle and provide a theory to account for it. I emphasize that hours per worker and individual hours relative to usual hours move counter to productivity. In the cross-section, I find that almost all workers increase their hours when productivity is low, except for low (residual) wage earners. Furthermore, low wage earners suffer larger wage losses when productivity falls. Based on these findings, I hypothesize that non-neutral movements in productivity exacerbate frictions due to adverse selection. I use recent advances in competitive search theory to imbed Akerlof's Rat Race into a Neo Classical growth model with search frictions. Firms bundle high earnings with long hours in order to separate more able and willing workers from the less productive. When low productivity workers fall (relatively) farther behind, the firm requires longer hours from everyone else; perversely, many workers work harder even as the market value of their time falls. A calibrated version of the model is used to measure the aggregate volatility generated by productivity shocks when labor markets are burdened by adverse selection.
Bankruptcy, Incorporation, and The Nature of Entrepreneurial Risk 
(joint with Jake Short)

Entrepreneurship is risky; entrepreneurs forgo wages and invest their time and resources into a business with large potential gains, but uninsurable risks. It is vital to know the extent of these risks, and the insurance available against them, in order to assess corporate tax and personal bankruptcy reforms. We document that incorporated entrepreneurs operate larger businesses, accumulate more wealth, and are on average more productive than unincorporated entrepreneurs. We embed the U.S. bankruptcy and incorporation legal systems in a quantitative macroeconomic theory of occupational, incorporation, and default choices that accounts for the cross-sectional facts. In the model, as in the U.S., incorporation provides insurance via limited liability beyond personal bankruptcy exemptions, at the expense of administrative burdens and an endogenous interest rate premium. Our model suggests that capital shocks are important entrepreneurial risks. A calibrated economy in which each unit of installed capital entails a small probability (0.6%) of a catastrophic shock (full destruction of capital) is able to account for the data along multiple untargeted dimensions. A counterfactual exercise is performed to see if reducing the costs of incorporation can account for an increase in wealth inequality in line with US data.