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Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—employment losses relative to an efficient allocation where the planner can costlessly reallocate unemployed workers across sectors to maximize output—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery episode characterized by labor shortages. We find that, for the first time in our sample, mismatch unemployment turned negative at the onset of the pandemic. This result suggests that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more-productive jobs, ...
Working Paper
The Micro and Macro Dynamics of Capital Flows
We study empirically and theoretically the effects of international financial flows on resource allocation. Using the universe of firms in Hungary, we show that removing capital controls lowers firms’ cost of capital and increases household consumption, with the latter playing a dominant role. The consumption channel leads to reallocation of resources toward high expenditure elasticity activities—such as services—promoting both the expansion of incumbents and firm entry. A multi-sector heterogeneous firm model replicates these dynamics. Our model shows that non-homotheticity in ...
Working Paper
Financial Development and International Trade
This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with input-output linkages and heterogeneous firms subject to financial frictions. Industries differ in capital-intensity, which leads to differences in external finance dependence. The model is parameterized to match key features of firm-level data. Financial development leads to substantial reallocation of international trade shares from labor- to capital-intensive industries, with minor effects at the ...
Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—employment losses relative to an efficient allocation where the planner can costlessly reallocate unemployed workers across sectors to maximize output—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery episode characterized by labor shortages. We find that, for the first time in our sample, mismatch unemployment turned negative at the onset of the pandemic. This result suggests that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more-productive jobs, ...
Working Paper
Sectoral Shocks, Reallocation, and Labor Market Policies
Unemployment insurance and wage subsidies are key tools to support labor markets in recessions. We develop a multi-sector search and matching model with on-the-job human capital accumulation to study labor market policy responses to sector-specific shocks. Our calibration accounts for structural differences in labor markets between the United States and the euro area, including a lower job-finding rate in the latter. We use the model to evaluate unemployment insurance and wage subsidy policies in recessions of different duration. We find that, after a temporary sector-specific shock, ...
Working Paper
The Aggregate Implications of Size Dependent Distortions
This paper examines the aggregate implications of size-dependent distortions. These regulations misallocate labor across firms and hence reduce aggregate productivity. It then considers a case-study of labor laws in France where firms that have 50 employees or more face substantially more regulation than firms that have less than 50. The size distribution of firms is visibly distorted by these regulations: there are many firms with exactly 49 employees. A quantitative model is developed with a payroll tax of 0.15% that only applies to firm above 50 employees. Removing the regulation improves ...
Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—employment losses relative to an efficient allocation where the planner can costlessly reallocate unemployed workers across sectors to maximize output—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery episode characterized by labor shortages. We find that, for the first time in our sample, mismatch unemployment turned negative at the onset of the pandemic. This result suggests that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more-productive jobs, ...
Working Paper
Trends and cycles in China's macroeconomy
We make four contributions in this paper. First, we provide a core of macroeconomic time series usable for systematic research on China. Second, we document, through various empirical methods, the robust findings about striking patterns of trend and cycle. Third, we build a theoretical model that accounts for these facts. Fourth, the model's mechanism and assumptions are corroborated by institutional details, disaggregated data, and banking time series, all of which are distinctive Chinese characteristics. We argue that preferential credit policy for promoting heavy industries accounts for ...
Working Paper
Automation and the Rise of Superstar Firms
Using an instrumental variable approach, we document evidence that the rise in automation technology contributed to the rise of superstar firms. We explain this empirical link in a general equilibrium framework with heterogeneous firms and variable markups. Firms can operate a labor-only technology or, by paying a per-period fixed cost, an automation technology that uses both workers and robots. Given the fixed cost, larger and more productive firms are more likely to automate. Automation boosts labor productivity, enabling those large automating firms to expand further, and thus raising ...
Working Paper
The 2025 Trade War: Dynamic Impacts Across U.S. States and the Global Economy
We use a dynamic trade and reallocation model with downward nominal wage rigidities to quantitatively assess the economic consequences of the recent increase in the U.S. tariffs on imports from Mexico, Canada, and China, as well as the “reciprocal” tariff changes announced on “Liberation Day” and retaliatory measures by other countries. Higher tariffs trigger an expansion in U.S. manufacturing employment, but this comes at the expense of declines in service and agricultural employment, with overall employment declining as lower real wages reduce labor-force participation. For the ...