American Economic Journal: Macroeconomics, Volume 10, No. 1, January 2018, pp 57-89, DOI 10.1257/mac.20150258
We document that job polarization -- contrary to the consensus -- has started as early as the 1950s in the US: middle-wage workers have been losing both in terms of employment and average wage growth compared to low- and high-wage workers. Given that polarization is a long-run phenomenon and closely linked to the shift from manufacturing to services, we propose a structural change driven explanation, where we explicitly model the sectoral choice of workers. Our simple model does remarkably well not only in matching the evolution of sectoral employment, but also of relative wages over the past fifty years.
Complimentary Access at AEJ:Macro, manuscript version
The AEA featured some data from the paper in their Chart of the Week (commencing 15 Jan 2018).
The Guardian featured some of the findings in an article on Sunday 20 August 2017; see here. They were also covered in the Japan Economic News.
Review of Economic Dynamics, Volume 24, March 2017, pp 152-174, DOI 10.1016/j.red.2017.01.010
Falling fertility rates have often been linked to rising female wages. However, over the last 40 years the US total fertility rate has been rather stable while female wages have continued to grow. Over the same period, women's hours spent on housework have declined, but men's have increased. I propose a model in which households are not perfectly specialized, but both men and women contribute to home production. As the gender wage gap narrows, the time allocations of men and women converge, and while fertility falls at first, the decline stops when female wages are close to male's. Rising relative wages increase women's labor supply and due to higher opportunity cost lower fertility at first, but they also lead to a reallocation of home production and child care from women to men, and a marketization. I find that both are important in understanding why fertility did not decline further. In a further quantitative exercise I show that the model performs well in matching fertility over the entire 20th century, including the overall decline, the baby boom, and the recent stabilization.
Open Access at RED, manuscript version, online appendix
Journal of Demographic Economics, Volume 81, Issue 03, September 2015, pp 217-260, DOI 10.1017/dem.2015.7
We study the impact of capital and labor taxation in an economy where couples bargain over the intrahousehold allocation under limited commitment. In this framework more wealth improves commitment and gives rise to insurance gains within the household. Our theory motivates these gains by the empirical observation that wealth, in contrast to labor income, is a commonly held resource within households. Based on this observation we study whether eliminating capital taxes from the economy, and raising labor taxes to balance the government's budget, may generate welfare gains to married households. We illustrate that the quantitative effects from this reform are rather small. We attribute the small effects to the life cycle pattern of wealth accumulation and to the impact of labor income taxes on household risk sharing: In particular, we show that higher labor taxes may make the limited commitment friction more severe, even though they may make the distribution of labor income more equitable within the household.
Complimentary Access at JODE, manuscript version
To study the drivers of the employment reallocation across sectors and occupations between 1960 and 2010 in the US we propose a model where technology evolves at the sector-occupation cell level. This framework allows us to quantify the bias of technology across sectors and across occupations. We implement a novel method to extract changes in sector-occupation cell productivities from the data. Using a factor model we find that occupation and sector factors jointly explain 74-87 percent of cell productivity changes, with the occupation component being by far the most important. While in our general equilibrium model both factors imply similar reallocations of labor across sectors and occupations, quantitatively the bias in technological change across occupations is much more important than the bias across sectors.
February 2018, Kent Economics Discussion Paper KDPE 1801
(previous version entitled "Disentangling occupation- and sector-specific technological change" and circulated as CEPR DP12663)
We summarized our findings and their implications in a (nontechnical) post on ProMarket.org, the blog of the Stigler Center at the University of Chicago Booth School of Business.
We argue that rising supply of experience not only reduces experienced workers' relative wages but also their relative labor market participation. From a theoretical model we derive predictions which we quasi-experimentally investigate, using variation across U.S. local labor markets (LLMs) over the last decades and instrumenting experience supply by the LLMs' age structures a decade earlier. We find that aging substantially reduces experienced workers' relative wages and employment rates, and also their labor market participation rates. Our results imply that the effect of demographic change on labor markets might be more severe than previously recognized, as it reaches beyond wages.