Job Market Paper

"The Welfare and Labor Market Effects of Occupational Licensing." (2018)

Abstract: Occupational licensing affects close to 25 percent of workers in the United States. The social benefits and costs of licensing policy are topics of much debate as licensing has implications for consumer welfare and labor market outcomes. Licensing policy protects consumers by alleviating an information asymmetry in the market of goods and services. However, it acts as a barrier to entry that distorts the occupational choice of workers in the labor market. This paper studies the effect of occupational licensing on welfare, the allocation of labor, and the wage premium between licensed and unlicensed workers. To analyze the trade-off generated by licensing policy, I develop a framework with adverse selection in the product market and occupational choice in the labor market. There are two productive sectors in the economy. In the licensed sector, the good that is produced is heterogeneous in its quality, which is unobservable to consumers. In the unlicensed sector, a homogeneous good is produced. The information asymmetry in the product market, carries over to the labor market, affecting the occupational choice of heterogeneous workers between sectors. Also, to enter the licensed sector a worker must obtain a license. To do so, the worker pays a fee and undergoes training, which is costly in terms of effort and time. I calibrate this model to the US labor market using the 2008 Survey of Income and Program Participation (SIPP) panel and the O*NET database. I find that removing licensing training requirements leads to a 3.9 percent reduction in consumer welfare, since the positive welfare effect of removing barriers to entry is offset by a negative welfare impact of lower quality licensed goods. In addition, when training is removed, the wage premium falls by more than half.

Working Papers

"Corporate Tax Rates, Allocative Efficiency, and Aggregate Productivity" Joint with Marcos Dinerstein(SSRN Link)

Abstract: This paper quantifies the impact of effective corporate tax rates on aggregate total factor productivity (TFP). Using Chilean manufacturing data, we document a large dispersion in the effective tax rate faced by firms and a mass of firms facing a 0 percent tax rate. We incorporate these findings into a standard monopolistic competition model with corporate tax rates. We find that eliminating corporate tax rates increases TFP between 4 and 11 percent. We consider counterfactual policies in which all firms face the same tax rate and find a monotonically decreasing relationship between the level of the tax rate and TFP.

Work in Progress

"Demographics, Labor, and the Great Recession" Joint with Guillermo Cabral.

Abstract: Since the Great Recession, output and labor diverted from their pre-crisis long term trends. We show that demographics is able to explain a significant portion of the gap between the long-term trend and the data, for both output and labor. An important reason why demographics play an important role during the crisis's recovery period is that the Great Recession coincides with the “baby boomers” entering the age cohorts associated with lower levels of labor force participation. Accounting for these demographic changes, we document that labor is converging to a different employment trend. Furthermore, we modify the standard growth model and calibrate it to capture the demographic features of the data for the period 1990 - 2015. Our results show that by 2015 the output and labor gap have been reduced by just 2.5% and 1.2% respectively.

"An Empirical Labor Search Model: Labor Markets and Informality in Developing Countries

Abstract: Developing countries' labor markets are characterized by having a substantial portion of the labor force in informal employment relationships. Due to this, I empirically evaluate an equilibrium labor search model with wage posting, which includes an informal sector, using data for Mexico. I find that the model is able to replicate higher wages in the formal sector relative to the informal sector. However, wage inequality in the Mexican labor market is underestimated within sectors. With respect to the labor market's dynamics, the model yields that informal jobs are much less stable than formal jobs and that unemployed workers receive job offers at a higher rate, which are consistent with the data. On the other hand, the model underestimates mobility from the formal sector to the informal sector.