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The Alpha Beta Gamma of the Labor Market
April 2022
Working Paper Number:
CES-22-10
Using a large panel dataset of US workers, we calibrate a search-theoretic model of the labor market, where workers are heterogeneous with respect to the parameters governing their employment transitions. We first approximate heterogeneity with a discrete number of latent types, and then calibrate type-specific parameters by matching type-specific moments. Heterogeneity is well approximated by 3 types: as, 's and ?s. Workers of type a find employment quickly because they have large gains from trade, and stick to their jobs because their productivity is similar across jobs. Workers of type ? find employment slowly because they have small gains from trade, and are unlikely to stick to their job because they keep searching for jobs in the right tail of the productivity distribution. During the Great Recession, the magnitude and persistence of aggregate unemployment is caused by ?s, who are vulnerable to shocks and, once displaced, they cycle through multiple unemployment spells before finding stable employment.
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Development of Survey Questions on Robotics Expenditures and Use in U.S. Manufacturing Establishments
October 2018
Working Paper Number:
CES-18-44
The U.S. Census Bureau in partnership with a team of external researchers developed a series of questions on the use of robotics in U.S. manufacturing establishments. The questions include: (1) capital expenditures for new and used industrial robotic equipment in 2018, (2) number of industrial robots in operation in 2018, and (3) number of industrial robots purchased in 2018. These questions are to be included in the 2018 Annual Survey of Manufactures. This paper documents the background and cognitive testing process used for the development of these questions.
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Individual Changes in Identification with Hispanic Ethnic Origins: Evidence from Linked 2000 and 2010 Census Data
August 2018
Working Paper Number:
carra-2018-08
Population estimates and demographic profiles are central to both academic and public debates about immigration, immigrant assimilation, and minority mobility. Analysts' conclusions are shaped by the choices that survey respondents make about how to identify themselves on surveys, but such choices change over time. Using linked responses to the 2000 and 2010 Censuses, our paper examines the extent to which individuals change between specific Hispanic categories such as Mexican origin. We first examine how changes in identification affect population change for national and regional origin groups. We then examine patterns of entry and exit to understand which groups more often switch between a non-Hispanic, another specific origin, or a general Hispanic identification. Finally, we profile who is most likely to change identification. Our findings affirm the fluidity of ethnic identification, especially between categories of Hispanic origin, which in turn carries important implications for population and compositional changes.
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Older and Slower: The Startup Deficit's Lasting Effects on Aggregate Productivity Growth
June 2018
Working Paper Number:
CES-18-29
We investigate the link between declining firm entry, aging incumbent firms and sluggish U.S. productivity growth. We provide a dynamic decomposition framework to characterize the contributions to industry productivity growth across the firm age distribution and apply this framework to the newly developed Revenue-enhanced Longitudinal Business Database (ReLBD). Overall, several key findings emerge: (i) the relationship between firm age and productivity growth is downward sloping and convex; (ii) the magnitudes are substantial and significant but fade quickly, with nearly 2/3 of the effect disappearing after five years and nearly the entire effect disappearing after ten; (iii) the higher productivity growth of young firms is driven nearly exclusively by the forces of selection and reallocation. Our results suggest a cumulative drag on aggregate productivity of 3.1% since 1980. Using an instrumental variables strategy we find a consistent pattern across states/MSAs in the U.S. The patterns are broadly consistent with a standard model of firm dynamics with monopolistic competition.
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Bankruptcy Spillovers
January 2017
Working Paper Number:
CES-17-16
How do different bankruptcy approaches affect the local economy? Using U.S. Census microdata at the establishment level, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We exploit the random assignment of bankruptcy judges as a source of exogenous variation in the probability of liquidation. We find that within a five year period, employment declines substantially in the immediate neighborhood of the liquidated establishments, relative to reorganized establishments. Most of the decline is due to lower growth of existing establishments and, to a lesser extent, reduced entry into the area. The spillover effects are highly localized and concentrate in the non-tradable and service sectors, particularly when the bankrupt firm operates in the same sector. These results suggest that liquidation leads to a reduction in consumer traffic to the local area and to a decline in knowledge spillovers between firms. The evidence is inconsistent with the notion that liquidation leads to creative destruction, as the removal of bankrupt businesses does not lead to increased entry nor the revitalization of the area.
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Redistribution of Local Labor Market Shocks through Firms' Internal Networks
January 2017
Working Paper Number:
CES-17-03
Local labor market shocks are difficult to insure against. Using confidential micro data from the U.S. Census Bureau's Longitudinal Business Database, we document that firms redistribute the employment impacts of local demand shocks across regions through their internal networks of establishments. During the Great Recession, the massive decline in house prices caused a sharp drop in consumer demand, leading to large employment losses in the non-tradable sector. Consistent with firms smoothing out the impacts of these shocks across regions, we find large elasticities of non-tradable establishment-level employment with respect to house prices in other counties in which the firm has establishments. At the same time, establishments of firms with larger regional networks exhibit lower employment elasticities with respect to local house prices in the establishment's own county. To account for general equilibrium adjustments, we aggregate non-tradable employment at the county level. Similar to what we found at the establishment level, we find that non-tradable county-level employment responds strongly to local demand shocks in other counties linked through firms' internal networks. These results are not driven by direct demand spillovers from nearby counties, common shocks to house prices, or local demand shocks affecting non-tradable employment in distant counties indirectly via the trade channel. Our results suggest that firms play an important role in the extent to which local labor market risks areshared across regions.
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State Taxation and the Reallocation of Business Activity: Evidence from Establishment-Level Data
January 2017
Working Paper Number:
CES-17-02
Using Census microdata on multi-state firms, we estimate the impact of state taxes on business activity. For C corporations, employment and the number of establishments have corporate tax elasticities of -0.4, and do not vary with changes in personal tax rates. Pass-through entity activities show tax elasticities of -0.2 to -0.3 with respect to personal tax rates, and are invariant with respect to corporate tax rates. Reallocation of productive resources to other states drives around half the effect. Capital shows similar patterns but is 36% less elastic than labor. The responses are strongest for firms in tradable and footloose industries.
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Firm Leverage, Consumer Demand, and Employment Losses during the Great Recession
January 2017
Working Paper Number:
CES-17-01
We argue that firms' balance sheets were instrumental in the propagation of consumer demand shocks during the Great Recession. Using establishment-level data, we show that establishments of more highly levered firms exhibit a significantly larger decline in employment in response to a drop in consumer demand. These results are not driven by firms being less productive, having expanded too much prior to the Great Recession, or being generally more sensitive to fluctuations in either aggregate employment or house prices. At the county level, we find that counties with more highly levered firms experience significantly larger job losses in response to county-wide consumer demand shocks. Thus, firms' balance sheets also matter for aggregate employment. Our research suggests a possible role for employment policies that target firms directly besides conventional stimulus.
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Creditor Rights and Entrepreneurship:
Evidence from Fraudulent Transfer Law*
January 2016
Working Paper Number:
CES-16-31
We examine entrepreneurial activity following the adoption of fraudulent transfer laws in the U.S. These laws strengthen creditor rights by removing the burden of proof from creditors attempting to claw back funds that were transferred out of failing businesses. These laws are particularly important for entrepreneurs whose personal assets are often commingled with those of the venture. Using establishment-level data from the U.S. Census Bureau, we find significant declines in start-up entry, churning among new entrants, and closures of existing ventures after the passage of these laws. Our
findings suggest that strengthening creditor rights can, in some circumstances, impede entrepreneurial activity and slow down the process of creative destruction.
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Dutch Disease or Agglomeration? The Local Economic Effects of Natural Resource Booms in Modern America
November 2015
Working Paper Number:
CES-15-41
Do natural resources benefit producer economies, or is there a "Natural Resource Curse," perhaps as Dutch Disease crowds out manufacturing? We combine new data on oil and gas abundance with Census of Manufactures microdata to estimate how oil and gas booms have affected local economies in the United States. Migration does not fully offset labor demand growth, so local wages rise. Notwithstanding, manufacturing is actually pro-cyclical with resource booms, driven by growth in upstream and locally traded sectors. The results highlight the importance of highly local demand for many manufacturers and underscore how natural resource linkages can drive manufacturing growth.
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