Research

Need fluctuates over the business cycle. We conduct a survey revealing a desire for nonprofit activities to countercyclically expand during downturns. We then demonstrate, using comprehensive US nonprofit data drawn from millions of tax returns, that the public’s hopes are disappointed. Nonprofit expenditure, revenue, and balance sheets fluctuate procyclically: contracting during national and local downturns. This finding is evident even for a narrow group of nonprofits that the public most wishes would expand during downturns, for example, those providing critical needs such as food or housing. Our new facts contribute to the charitable giving, nonprofit, and business cycle literatures. 

[Paper, Working Paper]

This paper examines how firms’ monopsony power—their ability to depress wages by restricting employment—in the market for inventors affects U.S. innovation and economic growth. Using an instrumental variable strategy, I estimate firm-level inventor labor supply elasticities and find that firms face less than perfectly elastic supply, with larger employers wielding greater monopsony power. I develop and quantify a heterogeneous firms growth model with size-dependent monopsony power that matches this evidence. The model suggests that monopsony power reduces annual U.S. economic growth by 0.20 percentage points and welfare by 11% through depressed R&D employment and misallocation.

[Paper, IMF WP]

This paper provides evidence that rising misallocation in the R&D sector contributed to the recent slowdown in U.S. productivity growth. I develop a growth accounting framework allowing for misallocation of R&D resources across firms captured by wedges between their marginal cost and benefits of R&D. I show that R&D wedges can be measured from R&D returns and document large and persistent differences in R&D returns across US-listed firms. Combining data and model, I estimate that frictions reduced productivity growth by 18% over 1975–2014 and that rising misallocation in the R&D sector accounts for 25% of the growth slowdown.

[Paper, IMF WP]

Leading AI firms claim to prioritize social welfare. How should firms with a social mandate price and deploy AI? We derive pricing formulas that depart from profit maximization by incorporating incentives to enhance welfare and reduce labor disruptions. Using US data, we evaluate several scenarios. A welfarist firm that values both profit and welfare should price closer to marginal cost, as efficiency gains outweigh distributional concerns. A conservative firm focused on labor-market stability should price above the profit-maximizing level in the short run, especially when its AI may displace low-income workers. Overall, socially minded firms face a trade-off between expanding access to AI and the resulting loss in profits and labor market risks.

[Paper]

This paper studies how gradualism affects the welfare gains from trade, technology, and reforms. When workers face adjustment frictions, gradual shocks create less adverse distributional effects in the short run. We show that there are welfare gains from inducing a more gradual transition via temporary taxes on trade and technology and provide formulas for the optimal path for taxes. Our formulas account for the possibility that reallocation effort responds to policy and for the existence of income taxes and assistance programs. Using these formulas, we compute the optimal temporary taxes needed to mitigate the distributional consequences of rising import competition from China and the deployment of automation technologies substituting for routine jobs. Our formulas can also be used to compute the optimal timing of economic reforms or trade liberalizations. We study Colombia's trade liberalization in 1990 and conclude that optimal policy called for a more gradual reform.

[Paper]

This paper provides evidence that rapid workforce aging has contributed to slow productivity growth in the US over the last two decades, through its impact on innovation. I document that workforce aging in local labor markets leads to a reduction in R&D employment and fewer inventions using an instrumental variable strategy. Reductions in R&D employment are driven by within-age group changes, rather than a composition effect driven by age-specific R&D employment rates. This finding suggests that workforce aging impacts innovation through a demand channel, i.e., younger workers have a higher demand for inventions, rather than a supply channel operating, e.g., through the comparative advantage of young workers in innovation. Corroborating a strong demand channel of demographics, I also find that the workforce aging of international trading partners leads to a reduction in local innovation.

[Paper]