Firm Heterogeneity and Racial Labor Market Disparities
Black workers are more exposed to business cycle employment risk than white workers, even after adjusting for differences in industry and other factors. This paper shows that large employers play an outsized role in the excess sensitivity of Black employment, both in a variance decomposition with aggregate data and in micro-level regressions with individual controls. Motivated by this evidence, the paper develops and calibrates a search model with flexibly-specified racial disparities in hiring that vary with firm size. Large firms employ more Black workers, as in the data.
In a slack labor market, Black employment is more negatively affected, as firms become more selective about hiring. This effect is amplified at large firms due to spillover effects on wages, though the relative contributions of large and small employers depend on the form of racial disparities. The preferred specification explains 45% of the empirical worsening employment gap and 72% of the share that comes from large firms.
On the Real Transmission of the Global Financial Cycle with Matias Moretti, Pablo Ottonello, and Diego Perez
We study the role of firm heterogeneity for economic transmission in open economies. Using firm-level data from a panel of emerging markets, we document that increases in the global price of risk are followed by heterogeneous dynamics, with contractions for risky firms and expansions for risk-free firms. By developing a quantitative heterogeneous-firm open economy model, we show that these cross-sectional empirical patterns can be explained by the presence of indirect channels that mitigate the negative response to external shocks. We use the model to assess macroeconomic transmission during external crises and sudden stops. Our findings indicate that allowing the exchange rate to depreciate during downturns plays a stabilizing role, by reducing risk exposure and facilitating the reallocation of economic activity across firms through larger relative price adjustments.
Worker Selection and Skilled Immigration Policy with Mishita Mehra
The U.S. H-1B program helps firms hire high-skilled foreign workers, but increasingly faces a binding annual cap that is allocated through lottery-based rationing. When candidates differ in productivity and firms face imperfect information at hiring, workforce productivity and domestic outcomes become endogenous to policy design. We document higher average wages among foreign-born workers in H-1B intensive occupations, consistent with positive selection among applicants. We rationalize this pattern with a quantitative general equilibrium search and matching model with heterogeneous worker productivity, noisy screening, H-1B filing costs, and an endogenously binding cap. The calibrated model explains half of the wage gap we observe in the data. We use the model to evaluate recent reforms that replace uniform lottery selection with wage-weighted selection. Under the existing cap, wage-weighted reallocation increases average foreign-hire productivity by about 4.7%, raises skilled-sector output by about 0.09%, has limited negative impacts on domestic skilled wages, while slightly increasing domestic skilled employment and unskilled wages. Matching the same foreign productivity gain through higher filing costs or a tighter cap instead reduces vacancy creation and generates negative effects on domestic skilled employment and wages. The gains from reallocation are attenuated when the foreign applicant pool shrinks and when firms can strategically bunch wages at tier cutoffs.
Intergenerational Occupation Choice
Parents' labor market experiences are influential for children's later earnings and career trajectories. This paper examines a new channel through which these outcomes may be connected: risk-taking in career choices. The first section constructs a simple empirical measure of lifetime earnings risk for 22 early career occupations observed in the Panel Study of Income Dynamics. Using linked parent and child data, the paper shows that parental layoffs are correlated with children earning less in their early careers and working in occupations with lower risk. This sorting channel can explain at most 13% of the earnings gap. These results are validated using an alternative measure of parents' exposure to macroeconomic shocks through their industry of employment.