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Working Papers

1. Predicting Labor Force Types, with Jiyoung Kim, Fabian Lange, Jérôme Larivière, and Markus Poschke.
   May 2026. PDF (working paper)

   A small group of people accounts for most flows between labor market states and most spells in non-employment. Using NLSY79 panel data, we apply k-means clustering on labor force transitions between ages 30 and 50 to identify a weakly attached group, disproportionately female, less educated, and in poor health. Using only information from ages 22 to 29, we predict membership in this low-attachment group with high precision, especially from early labor market experiences and health, pointing to persistent heterogeneity that shapes labor market outcomes over the life cycle.

2. The Dynamics of Firm-level Pay: Theory and Evidence from Portugal, with Gian Luca Clementi.
   December 2025. PDF (working paper)

   We build a tractable model of firm-pay heterogeneity, introducing monopsony power into a Hopenhayn-style firm dynamics framework. We use it to understand earnings inequality in Portugal, which rose from the mid-1980s but has fallen steeply since the mid-1990s. We trace this decline to a compression in firm pay, driven by a weaker pass-through from firm productivity to wages, suggesting falling employer labor market power as a chief determinant.

Published and Forthcoming Papers

1. Labor Force Transitions, with Fabian Lange and Markus Poschke, Handbook of Labor Economics, 2025. PDF (book) PDF (working paper)

   Labor force states and the flows between them are useful tools for modeling individual labor market dynamics. This chapter reviews recent literature uncovering substantial heterogeneity in these transitions, replicating leading studies with Canadian data and relating the findings to the literatures on recall non-employment, duration dependence, and job ladders.

2. Occupational Choice, Human Capital, and Financial Constraints, with Pavel Sevcík.
   Canadian Journal of Economics, Symposium Issue on "Misallocation and Structural Transformation," August 2024.
   PDF (journal) PDF (working paper)

   We study how firm-level financial frictions affect aggregate productivity when credit constraints distort both production and schooling decisions. Anticipating future constraints, entrepreneurs under-invest in schooling, so frictions misallocate talent across occupations and capital across firms while also lowering firm productivities. These channels account for 36% to 68% of the U.S.-India productivity gap, with schooling distortions the major source.

3. Explaining the Evolution of Educational Attainment in the U.S., with Daniele Coen-Pirani.
   American Economic Journal: Macroeconomics, July 2016. PDF (journal) PDF (working paper)

   We study educational attainment across the 1932-1972 cohorts using a calibrated model of human capital investment with heterogeneous learning ability, where schooling responds to skill prices, tuition, education quality, and cohort ability. A version with static expectations fits the main patterns: rising college skill prices explain the rapid rise in graduation through the 1948 cohort, while declining average ability helps explain its subsequent stagnation.

4. Cross-Sectoral Variation in Firm-Level Idiosyncratic Risk, with Gian Luca Clementi and Yoonsoo Lee.
   Journal of Industrial Economics, March 2015. PDF (journal) PDF (working paper)

   We estimate the volatility of plant-level idiosyncratic shocks in U.S. manufacturing, measured as the variation in Revenue TFP unexplained by industry, economy-wide, or establishment characteristics. Idiosyncratic shocks dominate, accounting for about 80% of the uncertainty plants face. Cross-sectoral variation is remarkable, roughly sixfold between the most and least volatile sectors, and idiosyncratic risk is higher where creative destruction is likely greater.

5. On the Individual Optimality of Economic Integration, with Nelnan Koumtingué.
   Journal of Monetary Economics, November 2014. PDF (journal) PDF (working paper)

   Which countries find it individually optimal to form an economic union? Emphasizing the risk-sharing benefits of integration, we study an endowment world economy with incomplete markets and unenforceable contracts, where a union resolves both frictions among members but still faces them externally. We derive conditions on members' initial income and net foreign assets under which a union is welfare-improving, predicting that unions are infrequent and most likely among homogeneous, rich countries.

6. Asset Pricing in a Production Economy with Chew-Dekel Risk Preferences, with Claudio Campanale and Gian Luca Clementi.
   Review of Economic Dynamics, April 2010. PDF (journal) PDF (working paper)

   We characterize asset returns in a general equilibrium production economy with Chew-Dekel risk preferences and convex capital adjustment costs. With disappointment aversion consistent with the experimental evidence, the model, calibrated to output and consumption growth volatility, generates expected returns and prices of risk in line with the data. By contrast, Epstein-Zin preferences require a risk aversion of at least 50, reflecting the limited risk a calibrated growth model imposes on agents.

7. The Economic Effects of Improving Investor Rights in Portugal, with Gian Luca Clementi.
   Portuguese Economic Journal, August 2009. PDF (journal) PDF (working paper)

   Since joining the EU in 1986, Portugal has grown strongly, with output per worker rising 2.25% annually, a falling relative price of investment, higher investment fueled by capital inflows, and improved resource allocation evident in a declining firm-level dispersion of labor productivity and size. We argue that improvements in outside investor rights since EU accession are a prime candidate to explain these facts.

8. Legal Institutions, Sectoral Heterogeneity, and Economic Development, with G. L. Clementi and G. MacDonald.
   Review of Economic Studies, April 2009. PDF (journal) PDF (working paper)

   Poor countries invest less and face higher relative prices of investment goods, often attributed to investment distortions. We provide a micro-foundation: firms producing capital goods face higher idiosyncratic risk than those producing consumption goods, and with incomplete investor protection this risk drives a wedge between sectoral returns that widens as protection weakens. Countries with weaker institutions thus face higher investment prices, invest less, and end up poorer. We find this mechanism may be quantitatively important.

9. Why Have Aggregate Skilled Hours Become So Cyclical since the Mid-1980s?, with Daniele Coen-Pirani.
   International Economic Review, February 2008. PDF (journal) PDF (working paper)

   We document a dramatic change in the cyclical behavior of aggregate skilled hours since the mid-1980s: using CPS data for 1979-2003, the volatility of skilled hours relative to GDP has nearly tripled, while unskilled hours are essentially unchanged. A simple supply/demand model with capital-skill complementarity accounts for about sixty percent of this increase in the relative volatility of skilled labor.

10. Economic Development under Alternative Trade Regimes.
    International Economic Review, May 2006. PDF (journal) PDF (working paper)

    How does openness affect economic development? I answer this in a dynamic general equilibrium model of the world economy where countries differ in technology, both in sector-neutral terms and specifically in the investment goods sector. Relative to a benchmark of trade in credit markets only, fully restricting trade lowers income dispersion only slightly with a small welfare loss, whereas full trade liberalization sharply reduces dispersion and yields very large welfare gains.

11. Economic Development and Growth in the World Economy.
    Review of Economic Dynamics, January 2005. PDF (journal) PDF (working paper)

    I investigate whether technological shocks calibrated to observed cross-country income dispersion can also account for development regularities in capital accumulation, using a quantitative model of an integrated world economy. The open economy framework disciplines country heterogeneity with international capital flows and enables study of distinctly open economy facts. Compared to Penn World Table data, the model generates too little dispersion in capital-output ratios and investment rates, but matches the relative importance of investment, saving, and capital flows for development.

12. Investor Protection, Optimal Incentives, and Economic Growth, with Gian Luca Clementi and Glenn MacDonald.
    Quarterly Journal of Economics, August 2004. PDF (journal) PDF (working paper)

    Does investor protection foster growth? We introduce it into a standard OLG model of capital accumulation. Better protection improves risk-sharing and, given entrepreneurial risk-aversion, raises capital demand (the demand effect); but in general equilibrium it also raises interest rates and lowers entrepreneurs' income, reducing savings and future capital supply (the supply effect), which is stronger where capital flows are more restricted. The model thus predicts a stronger positive growth effect where capital flows are less restricted, a prediction supported by cross-country data and the experiences of South Korea and India.

13. Compensations as Signaling Devices in the Political Economy of Reforms, with Daniele Coen-Pirani.
    International Economic Review, August 2003. PDF (journal) PDF (working paper)

    We explain why efficient reforms may fail even when losers can block them and compensations are feasible. A government sequentially implements two reforms by bargaining with endogenously organized interest groups, where distortionary compensations are valued differently across governments. To discourage losers seeking only transfers from organizing, governments offer low compensations, but this lets groups with high losses block reform, biasing outcomes against both compensation and reform.

Other Publications

1. Trajectoires possibles pour le marché du travail au Québec suite à la crise de la Covid-19, with Fabian Lange and Markus Poschke, prepared for the Québec Ministry of Finance, September 2020 (in French). PDF.
2. Education and Tuiton Fees, with Michel Poitevin.
   Actualité Économique, September 2014. PDF (journal, in French) PDF (CIRANO Burgundy Report 2013RB-01, in French)
3. Growth in Open Economies, Neoclassical Models.
   The Princeton Encyclopedia of the World Economy, Eds. K. Reinert and R. Rajan, Princeton University Press, 2009.
   Google Books (partial link).

Work in Progress

1. Tuition Subsidies as a Tool for Economic Development, with Pavel Sevcík.
2. Stimulative Effects of Temporary Corporate Tax Cuts, with William Gbohoui.