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. The statistical discrimination channel is most important for generating this effect in the calibrated model.
Firms' Investment and the Real Transmission of the Global Financial Cycle with Matias Moretti, Pablo Ottonello, and Diego Perez
We study how fluctuations in global financial conditions transmit to firms’ investment and economic activity in open economies. Using firm-level data from emerging markets, we show that increases in the global price of risk are followed by large investment contractions, especially among firms with higher default risk. Guided by these patterns, we develop a quantitative heterogeneous-firm open economy model in which firms finance investment with defaultable debt provided by risk-averse global investors. Our analysis identifies a strong risk channel through which increases in the price of risk raise firms’ financing costs, with pass-through determined by their quantity of risk—the sensitivity of debt repayment to global conditions. This mechanism introduces a risk dimension for stabilization policy, where reducing firms’ quantity of risk weakens the pass-through of external shocks. Through this lens, fixed exchange rate regimes amplify fluctuations because they raise firms’ quantity of risk by preventing 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.
Parental Experience and Occupation Risk
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 parsimonious 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 up to 13% of the earnings gap. Children’s occupation choices are most sensitive to fathers’ job loss late in childhood. These results are validated using an alternative measure of parents’ exposure to macroeconomic shocks through their industry of employment.