Working Papers

Firm Heterogeneity and Racial Labor Market Disparities (job market paper)

Black workers are more exposed to business cycle employment risk than white workers, even after adjusting for differences in industry and other cycle exposure factors. This paper introduces a new channel to explain the excess sensitivity of Black employment: employer heterogeneity in hiring. There are persistent differences in the job-finding and separation rates of Black and white workers across firms of different sizes. Black workers face higher separation rates and lower job-finding rates on average, with more extreme disparities at small firms. Meanwhile, when the labor market is weak, the job-finding rate falls more for Black workers, with the biggest drop coming from large firms. The second half of the paper introduces a search model with employer size-specific information frictions that captures these patterns. The abundance of available workers during downturns encourages firms to be more selective about the workers they hire, leading to worse hiring outcomes for minority workers at all firms. This selection effect can produce larger changes in hiring rates for the disadvantaged workers at firms with better screening technology, because these firms are able to capture a higher share of the matching market and they are more susceptible to general equilibrium effects.

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 connectedrisk-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.

Global Borrowing Costs and Firms' Risk in Open Economies 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.