Research

Working Papers

• Earnings Effects of Working at a Startup (with Gonzalo García-Trujillo &  Álvaro Silva) - JMP

Abstract: We study the effect of working for a startup on workers’ subsequent labor market outcomes using matched employer-employee administrative data from Chile. We find that moving to a startup implies an average penalty in earnings of 6.7% over the first five years after joining the firm. Roughly one-half of the reduction in earnings is due to lower average earnings while formally employed and the other half to spending more time out of formal employment. On average, over the five years after joining the firm, workers who move to startups have a two-percentage point lower probability of holding a job, have a lower probability of experiencing job-to-job transitions, and hold fewer jobs, suggesting that people who move to startups have a worse performance on the job ladder than those who move to established firms. We provide further evidence that these negative effects are persistent and vary across workers’ and firms’ characteristics. When compared to the earnings of an average worker who joins an established firm, the earnings penalty is significantly smaller when we condition on startups who survive (-1.32%). The difference becomes a wage premium for startups that are at the top of the sector size distribution by age 5.

• Lingering Effects of Recessions: Age-Differentiated Migration (with John Coglianese)

Abstract: Hysteresis arises when a short-term shock affects an economy’s medium to long-run performance. The consensus is that local labor markets in the US do not exhibit hysteresis (Blanchard and Katz, 1992; Dao et al., 2017). More specifically, recent evidence suggests that age-adjusted labor force participation and employment rates at the state level go back to pre-recession levels following a shock (Cajner et al., 2020; Gonzalez, 2020). However, recessions do appear to produce permanent demographic adjustments at the local level. Using data from the New York Fed Equifax Consumer Credit Panel, where we can follow people over time and have information on location and age, joined with sectorial GDP at the county level from the Bureau of Economic Analysis (BEA), we look at the migration decisions in response to local economic shocks by age group to understand the process behind these persistent changes in demographics. Our results indicate that prime-age adults decrease their in-migration rate to areas experiencing a recession. In contrast, the out-migration rate of retirement-age individuals increases after a local labor market experiences a positive shock. This result can explain hysteresis in raw employment and participation rates, not adjusted for demographics, due to the persistent effects of shocks on local demographic composition. These results are consistent with a model in which prime-age individuals are more sensitive to labor market conditions, and retirement-age people are more susceptible to the price of non-tradable goods, such as housing. Age-differentiated migration is a particularly relevant phenomenon because the composition of the labor market affects the business dynamism and the fiscal balance of the local economies.

• Hysteresis in the US Employment Rate Revised

Abstract: There are conflicting results on the existence of hysteresis in the employment rate after the Great Recession (GR). Yagan (2019) finds suggestive evidence in favor of hysteresis on the employment rate using cross-sectional variation in the impact of the GR, while Fallick and Krolikowski (2019), using time series variation, and that the employment rate does not display hysteresis. The focus of this paper is to contribute to this debate. I use cross-sectional variation in a similar fashion as Yagan (2019) and take into account differences in trends between states that were severely affected by the GR and states that were mildly affected, I nd that after removing differences in trend there is no evidence of hysteresis in the employment rate. Trying to understand the sources of the difference I explore the role of demographic trends. My findings indicate that after adjusting for the demographic composition of the population in severely and mildly hit states there is no evidence of hysteresis in the employment rate as the employment rate recovers fully by 2017.

• Fiscal Policy and Labor Markets in Low Income Economies  (with Alan Finkelstein-Shapiro)

Abstract: We study the implications of changes in distortionary fiscal policy on sectoral employment, unemployment, participation, and aggregate outcomes in low-income economies. We propose a general equilibrium framework with search frictions that features: (1) endogenous labor force participation decisions, (2) a distinction between agricultural and non-agricultural self-employment, and (3) a feedback effect from public capital to private-sector productivity. We find that increasing taxes on salaried-firm profits and capital gains raises salaried employment, output, consumption, and unemployment and reduces self-employment in non-trivial ways. Conversely, increasing consumption taxes raises self-employment and reduces salaried employment, output, and consumption. Abstracting from the presence of non-agricultural self-employment and endogenous participation decisions—two margins of central importance in low-income economies—imply minuscule employment and aggregate responses to plausible changes in fiscal policy. The prevalence of self-employment—a reflection of the level of development—plays an important role for the quantitative consequences of policy.

• "Local Variation in Onsite Work during the Pandemic and its Aftermath" (with Katharine Abraham,  Aref Darzi, Ali Kabiri, John Haltiwanger & Erkut Ozbay)

Using longitudinal data on the location of mobile devices, we provide new evidence on the evolution of onsite work (OSW) over the course of the pandemic and its aftermath. We start with a large sample of individuals who, based on their mobile device activity, had a job at which they worked onsite in February 2020. We track the evolution of these individuals’ onsite work activity over the following thirteen to fourteen months, observing them in May 2020, August 2020, November 2020 and March/April 2021. Consistent with other evidence, we find a dramatic decline in OSW in May 2020 followed by a substantial rebound by the spring of 2021, albeit to a lower level than in February 2020. We document considerable cross-state, cross-city and cross-county variation in OSW. We also find, however, that the tract-level variation in OSW within states, cities and even counties far exceeds the variation across larger geographic areas. Observable characteristics such as industry, occupation, education and income account for much of the variation in OSW across large geographic areas since the pandemic. These same variables account for much of the enormous cross-tract variation in OSW that remains after controlling for state or county, but more than half of the cross-tract variation is accounted for by residual factors. These findings imply considerable heterogeneity in how the pandemic has affected where the resident populations of U.S. neighborhoods spend their days, a finding that has significant implications for businesses, workers, and policymakers.