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Upstream, Downstream: Diffusion and Impacts of the Universal Product Code
January 2017
Working Paper Number:
CES-17-66R
We study the adoption, diffusion, and impacts of the Universal Product Code (UPC) between 1975 and 1992, during the initial years of the barcode system. We find evidence of network effects in the diffusion process. Matched-sample difference-in-difference estimates show that firm size and trademark registrations increase following UPC adoption by manufacturers. Industry-level import penetration also increases with domestic UPC adoption. Our findings suggest that barcodes, scanning, and related technologies helped stimulate variety-enhancing product innovation and encourage the growth of international retail supply chains.
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Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News
January 2017
Working Paper Number:
CES-17-15
Concave hiring rules imply that firms respond more to bad shocks than to good shocks. They provide a united explanation for several seemingly unrelated facts about employment growth in macro and micro data. In particular, they generate countercyclical movement in both aggregate conditional 'macro' volatility and cross-sectional 'micro' volatility as well as negative skewness in the cross section and in the time series at different level of aggregation. Concave establishment level responses of employment growth to TFP shocks estimated from Census data induce significant skewness, movements in volatility and amplification of bad aggregate shocks.
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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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The Role of Establishments and the Concentration of Occupations in Wage Inequality
September 2015
Working Paper Number:
CES-15-26
This paper uses the microdata of the Occupational Employment Statistics (OES) Survey to assess the contribution of occupational concentration to wage inequality between establishments and its growth over time. We show that occupational concentration plays an important role in wage determination for workers, in a wide variety of occupations, and can explain some establishmentlevel
wage variation. Occupational concentration is increasing during the 2000-2011 time period, although much of this change is explained by other observable establishment characteristics. Overall, occupational concentration can help explain a small amount of wage inequality growth between establishments during this time period.
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Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News
January 2015
Working Paper Number:
CES-15-02
We study the distribution of employment growth when hiring responds more to bad shocks than to good shocks. Such a concave hiring rule endogenously generates higher moments observed in establishment-level Census data for both the cross section and the time series. In particular, both aggregate conditional volatility ("macro-volatility") and the cross-sectional dispersion of employment growth ("micro-volatility") are countercyclical. Moreover, employment growth is negatively skewed in the cross section and time series, while TFP is not. The estimated response of employment growth to TFP innovations is su ciently concave to induce signi cant skewness as well as movements in volatility of employment growth.
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THE MARGINS OF GLOBAL SOURCING: THEORY AND EVIDENCE FROM U.S. FIRMS
December 2014
Working Paper Number:
CES-14-47
This paper studies the extensive and intensive margins of firms' global sourcing decisions. We develop a quantifiable multi-country sourcing model in which heterogeneous firms self-select into importing based on their productivity and country-specific variables. The model delivers a simple closed-form solution for firm profits as a function of the countries from which a firm imports, as well as those countries' characteristics. In contrast to canonical models of exporting in which firm profits are additively separable across exporting markets, we show that global sourcing decisions naturally interact through the firm's cost function. In particular, the marginal change in profits from adding a country to the firm's set of potential sourcing locations depends on the number and characteristics of other countries in the set. Still, under plausible parametric restrictions, selection into importing features complementarity across markets and firms' sourcing strategies follow a hierarchical structure analogous to the one predicted by exporting models. Our quantitative analysis exploits these complementarities to distinguish between a country's potential as a marginal cost-reducing source of inputs and the fixed cost associated with sourcing from this country. Counterfactual exercises suggest that a shock to the potential benefits of sourcing from a country leads to significant and heterogeneous changes in sourcing across both countries and firms.
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TAKEN BY STORM: BUSINESS SURVIVAL IN THE AFTERMATH OF HURRICANE KATRINA
April 2014
Working Paper Number:
CES-14-20
We use Hurricane Katrina's damage to the Mississippi coast in 2005 as a natural experiment to study business survival in the aftermath of a cost shock. We find that damaged establishments that returned to operation were more resilient than those that had never been damaged. This effect is particularly strong for establishments belonging to younger and smaller rms. The effect of damage on establishments in older and larger chains was more limited, and they were subsequently less resilient having survived the damage. These selection effects persist up to five years after the initial shock. We interpret these findings as evidence that the effect of the shock is tied to the presence of financial and other constraints.
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Clusters, Convergence, and Economic Performance
October 2010
Working Paper Number:
CES-10-34
This paper evaluates the role of regional cluster composition in the economic performance of industries, clusters and regions. On the one hand, diminishing returns to specialization in a location can result in a convergence effect: the growth rate of an industry within a region may be declining in the level of activity of that industry. At the same time, positive spillovers across complementary economic activities provide an impetus for agglomeration: the growth rate of an industry within a region may be increasing in the size and strength (i.e., relative presence) of related economic sectors. Building on Porter (1998, 2003), we develop a systematic empirical framework to identify the role of regional clusters ' groups of closely related and complementary industries operating within a particular region in regional economic performance. We exploit newly available data from the US Cluster Mapping Project to disentangle the impact of convergence at the region-industry level from agglomeration within clusters. We find that, after controlling for the impact of convergence at the narrowest unit of analysis, there is significant evidence for cluster-driven agglomeration. Industries participating in a strong cluster register higher employment growth as well as higher growth of wages, number of establishments, and patenting. Industry and cluster level growth also increases with the strength of related clusters in the region and with the strength of similar clusters in adjacent regions. Importantly, we find evidence that new industries emerge where there is a strong cluster environment. Our analysis also suggests that the presence of strong clusters in a region enhances growth opportunities in other industries and clusters. Overall, these findings highlight the important role of cluster-based agglomeration in regional economic performance.
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Firms' Exporting Behavior under Quality Constraints
May 2009
Working Paper Number:
CES-09-13
We develop a model of international trade with export quality requirements and two dimensions of firm heterogeneity. In addition to "productivity", firms are also heterogeneous in their "caliber" {the ability to produce quality using fewer fixed inputs. Compared to singleattribute models of firm heterogeneity emphasizing either productivity or the ability to produce quality, our model provides a more nuanced characterization of firms' exporting behavior. In particular, it explains the empirical fact that firm size is not monotonically related with export status: there are small firms that export and large firms that only operate in the domestic market. The model also delivers novel testable predictions. Conditional on size, exporters are predicted to sell products of higher quality and at higher prices, pay higher wages and use capital more intensively. These predictions, although apparently intuitive, cannot be derived from singleattribute models of firm heterogeneity as they imply no variation in export status after size is controlled for. We find strong support for the predictions of our model in manufacturing establishment datasets for India, the U.S., Chile, and Colombia.
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The Return to Knowledge Hierarchies
January 2007
Working Paper Number:
CES-07-01
Hierarchies allow individuals to leverage their knowledge through others. time. This mechanism increases productivity and amplifies the impact of skill heterogeneity on earnings inequality. To quantify this effect, we analyze the earnings and organization of U.S. lawyers and use the equilibrium model of knowledge hierarchies in Garicano and Rossi-Hansberg (2006) to assess how much lawyers, productivity and the distribution of earnings across lawyers reflects lawyers. ability to organize problem-solving hierarchically. We analyze earnings, organizational, and assignment patterns and show that they are generally consistent with the main predictions of the model. We then use these data to estimate the model. Our estimates imply that hierarchical production leads to at least a 30% increase in production in this industry, relative to a situation where lawyers within the same office do not vertically specialize. We further find that it amplifies earnings inequality, increasing the ratio between the 95th and 50th percentiles from 3.7 to 4.8. We conclude that the impact of hierarchy on productivity and earnings distributions in this industry is substantial but not dramatic, reflecting the fact that the problems lawyers face are diverse and that the solutions tend to be customized.
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