Research

Working Papers


Disentangling the Roles of Preferences and Shocks in Labor Supply (Job Market Paper)



Labor supply differs across people, even for the same levels of wages and assets. These differences can be driven by heterogeneity in preferences or by shocks to employment opportunities. Disentangling the two forces is important for policy but difficult to do in practice. I show that retirement decisions and their interactions with assets and labor history help to tell preferences and shocks apart. I document that wealthy people retire later and people with higher prime-age labor supply retire earlier. These facts can be jointly rationalized by the presence of preference heterogeneity and labor market constraints. I quantify the roles of preferences and shocks by calibrating a life-cycle model with endogenous retirement decision to German SOEP data. The model requires significant heterogeneity in bequest motives and allocates a big role to labor market constraints. Labor market shocks explain 50% of total variation in prime-age employment, while preferences explain 10%.


Inferring Changes in Technology from Labor Share and Workweek of Capital 



In this paper I propose a new way to identify changes in capital bias and returns to scale in the US manufacturing sectors over the time period from 1974 to 2004. This strategy is based on the observed movements in sector-level labor share and workweek of capital. I set up a cost-minimization problem of a firm with endogenous workweek and show that while labor share and workweek respond to changes in relative price of capital and capital bias with the same magnitude, workweek is much more responsive to changes in returns to scale than labor share. Since in the data labor share and workweek are not perfectly correlated, the model suggests that there is scope for changes in returns to scale. I show that the returns to scale indeed have been changing over time in many sectors, and that the changes have been heterogeneous ranging from 18% increase in metals sector to 8% decrease in dairy sector. Moreover, these changes appear to be positively correlated with changes in capital bias. This implies that there have been massive and heterogeneous changes in technology over time.




Work in Progress


Growing Up with an Unemployed Mother  
(with Paulo Lins)
 
Parents face a tradeoff: not to work and invest time in their children’s human capital, or to work and invest in market inputs, such as childcare or schooling. Unemployment impacts the time versus income trade-off, implying that parents can spend more time at home but earn less income. This can potentially have long-term consequences for children. We study the long-term effects of maternal unemployment on children’s labor market outcomes. Using NLSY 79, we find that the more time a mother is unemployed during her child’s formative years, the lower the wage of the child in the future. The results are significant, even when controlling for family income. This suggests that maternal unemployment has scarring effects beyond lower income, and that the increase in available hours does not compensate for the detrimental effects of unemployment. Currently, we are working on a quantitative model to distinguish between possible mechanisms that generate these scarring effects.