Research

Publications

• “Reducing the United States’ Risks of Dependency on China in the Rare Earth Market,” with Tennecia Dacass, Resources Policy (2022).
• “Reflections on the Volcker Rule: Innovations in the Financial Services Industry and Fixing Too Big to Succeed,” with Koushik Ghosh, Challenge (2022): 1-10.
• “Financial Market Integration, Exchange Rate Policy, and the Dynamics of Business and Employment in Korea,” with Matteo Cacciatore and Fabio Ghironi, NBER Chapter in: International Finance in the Global Markets, Journal of the Japanese and International Economies 42 (December 2016, lead article): 79-99.

Working Papers

• Excessive Firm Turnover in the Shadow of Unemployment

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Poster version

Abstract: This paper studies how pecuniary self-employment affects business cycle dynamics, macroeconomic efficiency, and the outcomes of structural reforms. I employ a two-sector dynamic general equilibrium model with endogenous producer entry. One sector (the “hiring sector”) is populated by monopolistically competitive firms that employ workers subject to search-and-matching frictions in order to produce output. The other sector consists of self-employment firms that use the output of the first sector as input. Self-employment is introduced as a possible occupational choice for the unemployed, relating firm creation more directly to the state of the labor market and to workers’ opportunity costs. Consistent with the U.S. data, the model shows that self-employment represents 7.4% of employment and is procyclical. The procyclicality of self-employment arises as positive productivity shocks in the hiring sector cause profits for the self-employed to rise strongly enough that additional unemployed workers are drawn into self-employment, despite tighter labor market conditions and a competing incentive to seek traditional employment. As a result, the number of firms is more volatile and welfare costs of business cycles are higher in the presence of self-employment. Novel sources of inefficiency exist since neither workers nor firms internalize the consequences of self-employment. This dispels the common misconception that all labor market rigidities increase self-employment; on the contrary, economies with almost no unemployment benefits or a very weak bargaining power could still show high self-employment rates. Furthermore, I show that reforms facilitating entry in one or the other sector are more effective when the self-employed are relatively less productive or have greater monopoly power.

• Trade Liberalization and Structural Reforms under Self-Employment

Abstract: Self-employment is much more prominent in small open economies and extremely concentrated in nontraded service sector goods that do not require very high skills and have low barrier to entry. I construct a two-sector dynamic, general equilibrium model in a small open economy framework where the self-employed produce nontradable goods. Through this setup, I ask the consequences of trade liberalization and its effect on the wage inequality under the presence of self-employment.

• Do Conference Calls Reduce Information Asymmetry When Bad News is Released? (with Han Donker)

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Abstract: This study examines the impact of Form 8-K filings and conference calls on information asymmetry when firms announce a downward revision in their financial performance guidance. Using a sample of 9,671 lowered earning guidance issued by U.S. firms between 2005 and 2022, the study finds that companies that only use a press release experience a more negative abnormal returns than those who use conference calls and disclose SEC filings. The study uses readability indices and sentiment analysis to capture the tone and complexity of Form 8-Ks and conference calls. The results show that positive-toned Form 8-K filings mitigate the negative impact on abnormal returns, while there is less evidence for the complexity of text used in Form 8-K or the tone of the conference call. The findings suggest that providing more information via 8-K filings and conference calls can reduce information asymmetry and mitigate negative impacts on the firm’s future returns.

• Growth, Unemployment, and the Public Sector

Abstract: The public sector wage bill represents an important component of total employment and fiscal expenditures. For the U.S. economy, it accounts for 60% of government expenditures. Despite these facts, our understanding of how public sector employment and wages affect long-run macroeconomic performance remains surprisingly limited. This paper attempts to contribute to filling this gap by setting out a rich but tractable model of endogenous growth with search and matching frictions where the private sector produces output using private sector labor, capital and public infrastructure. This simple structure allows us to analyze how public sector wages and vacancies affect unemployment and growth. Our setup highlights how the decision to invest in public infrastructure to enhance growth might have unintended consequences on the unemployment rate, which is a novel mechanism in the literature. Furthermore, we investigate if appropriate public sector wages and vacancies can internalize the externality from public infrastructure in the presence of production externalities.