Completed Papers

Earnings Dynamics Its Intergenerational Transmission: Evidence from Norway  (Quantitative Economics, 2022)
(with Elin Halvorsen and Serdar Ozkan)

Part of the Global Repository of Income Dynamics (GRID) which aims to produce a harmonized cross-country database containing detailed and relevant statistics on individual- and household-level wages, earnings, and related labor market measures. The STATA code used to produce the harmonized statistics in all countries was prepared by Serdar Ozkan and myself.

If you want to use the GRID code, please contact me and Serdar Ozkan

Working Papers

Technical Change and Entrepreneurship (July 2020, R&R AER)

Abstract. I document a significant decline in the share of entrepreneurs among US households over the last three decades. Most of this decline is accounted for by a drop in the share of entrepreneurs among college graduates. Using a standard entrepreneurial choice model with two skill groups—high- and low-skill individuals—I then argue that the decline is the outcome of two technological forces that have increased the returns to high-skill labor: the skill-biased technical change and the decrease in the price of capital. I find that these two forces account for three-quarters of the decline in the share of entrepreneurs. Paper

Why are the Wealthiest so Wealthy? A Longitudinal Empirical Investigation (March 2023) FIRST DRAFT
Review in Knowledge at Wharton
(with Elin Halvorsen, Serdar Ozkan, and Joachim Hubmer)

Abstract. We use Norwegian administrative panel data on wealth and income between 1993 and 2015 to study lifecycle wealth dynamics, focusing on the wealthiest households. On average, the wealthiest start their lives substantially richer than other households in the same cohort, own mostly private equity, earn higher returns, derive most of their income from dividends and capital gains, and save at higher rates. At age 50, the excess wealth of the top 0.1% group relative to mid-wealth households is accounted for in about equal terms by higher saving rates (34%), higher initial wealth (32%), and higher returns (27%), while higher labor income (5%) and inheritances (1%) account for the small residual. There is significant heterogeneity among the wealthiest: one-fourth of them—which we dub the “New Money”—start with negative wealth but experience rapid wealth growth early in life. Relative to the quartile of top owners that already started their life rich—the “Old Money”—the New Money are characterized by even higher saving rates and returns and also by higher labor income. Their excess wealth is mainly explained by higher saving rates (46%), higher returns (34%), and higher labor income (16%). Paper

Skewed Business Cycles (May 2023, R&R QJE) UPDATED DRAFT
(with Fatih Guvenen and Nicholas Bloom)
NBER version, 2019
Review in, May 5, 2020

Abstract. Abstract Using establishment and firm panel data from the US Census and almost fifty other countries, we show that the skewness of the growth rates of employment, sales, and productivity is procyclical. Firm growth rates display a large negative left tail during recessions and a large positive right tail during expansions. We find similar results at the industry level: industries that are contracting see more left-skewed growth rates of firm sales, employment, and productivity, and industries that are expanding see more right-skewed growth rates. These firm-level negative skewness shocks foreshadow a significant decline in macroeconomic activity, even after controlling for the first and second moments of firm growth. We explain these findings with a heterogeneous-agent model in which risk-averse entrepreneurs face a time-varying distribution of productivity shocks, leading them to cut back on hiring and investment when facing greater downside risk. This suggests the fluctuating risk of large negative and positive firm-level shocks can be an important driving force of business cycles. Paper

Heterogeneous Passthrough from TFP to Wages  (March 2023) UPDATED
(with Mons Chan and Ming Xu)

Abstract. Abstract We examine the passthrough of firms’ productivity shocks to wages using rich matched employer-employee data, allowing us to control for worker mobility and unobserved worker-firm heterogeneity. Passthrough elasticities range from 0 to 0.2 depending on the nature of the shock and type of worker and firm. Hourly wages are twice as responsive to negative shocks as to positive shocks–especially during recessions. Ignoring endogenous labor mobility underestimates passthrough, erroneously implying downward wage rigidity. Our findings are consistent with models of labor market power and suggest a larger role for firm shocks in determining workers’ wage variability relative to previous estimates. Paper

The Great Micro Moderation 
(with Nicholas Bloom, Fatih Guvenen, Luigi Pistaferri, John Sabelhaus, and Jae Song)

Abstract. This paper documents that individual income volatility in the United States has declined in an almost secular fashion since 1980—a phenomenon that we call the “Great Micro Moderation.” This finding contrasts with the conventional wisdom, based on studies using survey data, that income volatility—a simple measure of uncertainty—has increased substantially during the same period. The finding of declining volatility is consistent with a handful of recent papers that use administrative data. We substantially extend the existing empirical findings of declining volatility using data from both administrative and survey-based data sets. A key contribution of our paper is to link patterns of income volatility on the worker side to outcomes (and volatility) on the firm/employer side. With the information revealed by these linkages, we investigate several potential drivers of this trend to understand if declining volatility represents a broadly positive development—declining income risk and uncertainty—or a negative one, i.e., declining business dynamism. Paper

Work in Progress

A Quantitative Exploration of Wealth Inequality: New Insights from Panel Data
(with Elin Halvorsen, Serdar Ozkan, and Joachim Hubmer)

Wage Setting and Passthrough: The Role of Market Power, Production Technology, and Adjustment Costs
(with Mons Chan, Elena Mattana, and Ming Xu)

Taxing the Rich
(with V.V. Chari, Elena Pastorino, and Patrick Kehoe)

Firm Productivity and Labor Quality 
(with Mons Chan, Frederic Warzynski, and Ming Xu)

Work Before PhD

Does the BIC Estimate and Forecast Better than the AIC? (with Carlos Medel).  Economic Analysis Review, 2013. Paper.