Macroeconomic Research on Labor Markets, Inequality and Innovation
Faculty Supervisor(s):

Ilse Lindenlaub and Michael Peters

Project Description:

We are looking for a fellow to work with us on three projects related to the macroeconomic analysis of labor markets. The fellow will split their time between these three projects and will thus get exposed to a variety of economic applications and methodological approaches. 

The first project, which is joint work of the two us together with one of our graduate students, Ryungha Oh, studies the role of firm sorting across space for inequality. Economic growth in the United States has been staggeringly unequal since the early 1980s. While most existing research focuses on inequality across people, a recent literature highlights the disparate economic fortunes across space. Like inequality at the individual-level, the spatial nature of growth has also changed: while traditionally the US has been characterized by spatial convergence, recently spatial inequality has been increasing and poor, rural locations have been falling further behind. In this project, we bridge these two literatures both to better understand the fundamental forces behind rising inequality and to provide a quantitative framework to study optimal place-based policies with a particular focus on reducing inequality.

The second project, led by Ilse Lindenlaub, studies the implications of interactions between the marriage market and the labor market for macroeconomic outcomes, with focus on household and gender inequality. We link the labor and marriage markets through two key channels: spousal labor supply and sharing of (endogenous) labor market risk.

Our first objective is to analyze how sorting in both markets affect households' risk exposure, intra-household risk-sharing and how risk-sharing has changed over time in light of salient changes in sorting---the fact that spouses sort more strongly on education today than before, and also the fact that labor market sorting between workers' skills and jobs' productivity has strengthened. Second, given that household labor supply adjustments and risk-sharing are crucial stabilizers during economic recessions, we would like to understand how the transmission of aggregate shocks to consumption changed over time due to the documented sorting changes. These questions are relevant, especially in light of the current US policy debate on expanding family and childcare support. These policies will likely affect households' labor supply choices, and therefore labor market sorting and labor market risk, and ultimately intra-household risk-sharing and inequality.

The third project, led by Michael Peters, is concerned with the secular trend of declining population growth. Fertility has been on a declining trajectory in many developed economies for decades. While the US was able to budge this trend in the 90s and 2000s through international migration, the latest US census published in 2020 showed the population to grow at its slowest pace since the Great Depression. Moreover, virtually all projections suggest this trend to persist for decades: falling population growth looks like it is here to stay. This trend is not only a concern for the viability of social security through rising dependency ratios, but also has important effects for the future on US innovation and market concentration. In recent work with Conor Walsh ("Population Growth and Firm Dynamics"), we showed within the context of an aggregate macroeconomic model, that declining population growth is an important contributor to the recent decline business dynamism, that is falling entry rates, rising concentration and higher markups. In this project, we want to build on this work to understand the role of policy. Should policy makers subsidize firm creation or R&D if falling population growth reduces the profitability of innovative investments? Can opening up to trade act as a substitute and allow the US to effectively import foreign population growth? And does this trend suggest that one should reconsider the virtues of industrial policies? Answering these questions is crucial to predict the future of US growth in the decades to come.

Requisite Skills and Qualifications:

We are looking for a highly motivated student, who is interested in both theoretical and empirical work, can work independently and is eager to learn. Fluency in R/STATA and MATLAB/Julia is required. Prior experience as a research assistant in Economics or a related field is a plus but not essential.

Special Application Instructions: