Results

Journal article

The Review of Economics and Statistics:

The importance of student-teacher matching: a multidimensional value-added approach

We propose a framework for value-added models that flexibly characterizes heterogeneous teacher productivity based on multidimensional student characteristics. We show that teacher effectiveness heavily depends on the sp...Read more...

Journal article

The Economic Journal:

Manipulation and selection in unemployment insurance

In this paper, we study the selection patterns of individuals who manage to have their lay-off delayed around an age at lay-off threshold entitling them to four additional months of unemployment insurance, that is, manip...Read more...

CEP discussion paper

Location choice when the number of jobs matters: matching in spatial equilibrium

The idea that people want to go to where the jobs are is intuitive yet is absent from the standard quantitative spatial modelling approach in which location choices are guided by prices, without reference to quantities (...Read more...

CEP discussion paper

Productivity, matchability and intermediation in production networks

This paper examines intermediation in production networks to unpack the firm attributes and matching costs that govern firm-to-firm networks and the gains from trade. Exploiting rich customs data for Chile, we show that ...Read more...

CEP discussion paper

Job displacement, remarriage and marital sorting

We investigate how job displacement affects whom men marry and study implications for marriage market matching theory. Leveraging quasi-experimental variation from Danish establishment closures, we show that job displace...Read more...

CEP discussion paper

Highway traffic in Britain: the effect of road capacity changes

This paper examines the effects of road capacity expansion on traffic volumes, population, and employment in Great Britain between 2001 and 2020, using annual data for 218 Travel-to-Work Areas and an instrumental-variabl...Read more...

CEP discussion paper

Firm heterogeneity and imperfect competition in global production networks

How do production networks and market structure interact to shape the effects of trade and competition policy? We develop a model with two-sided firm heterogeneity, matching frictions, and imperfect supplier competition....Read more...

CEP discussion paper

Production function estimation using subjective expectations data

Standard proxy methods for estimating production functions in the Olley and Pakes (1996) tradition require assumptions on input choices. We introduce a new method that exploits (increasingly available) data on firms' exp...Read more...

Journal article

The Review of Economic Studies:

A theory of falling growth and rising rents

Growth has fallen in the U.S. amid a rise in firm concentration. Market share has shifted to low labour share firms, while within-firm labour shares have actually risen. We propose a theory linking these trends in which ...Read more...

CEP discussion paper

Who's got the power? Wage determination and its resilience in the Great Recession

Whereas wage inequality has risen markedly in most OECD countries in recent decades, it has fallen in several Southern European economies. To shed light on this phenomenon, we embed sectoral bargaining, which is common i...Read more...

CEP discussion paper

Sparse production networks

Firm-to-firm connections in domestic and international production networks play a fundamental role in economic outcomes. Firm heterogeneity and the sparse nature of firm-to-firm connections implicitly discipline network ...Read more...

Journal article

Review of Economics and Statistics:

The impact of contract enforcement costs on value chains and aggregate productivity

I study how supplier contracting frictions shape the patterns of intermediate input use and quantify the impact of these distortions on aggregate productivity. Using the frequency of litigation between US firms as a nove...Read more...

Journal article

Journal of the European Economic Association:

Parents, schools and human capital differences across countries

This paper studies the contribution of parental influence in accounting for cross-country gaps in human capital achievements. We argue that the cross-country variation in unobserved parental characteristics is at least a...Read more...

Journal article

The Economic Journal:

Trapped factors and China?s impact on global growth

After a recent increase in Chinese import competition, European firms increased innovation. We present and rationalise these patterns using `trapped factors? at the micro level within a stylised equilibrium model of prod...Read more...

Journal article

Journal of International Economics:

Preferential trade agreements and global sourcing

We develop a new framework to study the welfare consequences of preferential trade agreements (PTAs) under global sourcing, incomplete contracts and endogenous matching. We uncover several new channels through which PTAs...Read more...

Journal article

IZA Journal of Labor Economics:

Reallocation and the role of firm composition effects on aggregate wage dynamics

Aggregate wages display little cyclicality compared to what a standard model would predict. Wage rigidities are an obvious candidate, but the existing literature has emphasized the need to take into account the growing i...Read more...

CEP discussion paper

Preferential trade agreements and global sourcing

We study how a preferential trade agreement (PTA) affects international sourcing decisions, aggregate productivity and welfare under incomplete contracting and endogenous matching. Contract incompleteness implies underin...Read more...

Journal article

CESifo Economic Studies:

Weights to address non-parallel trends in panel difference-in-differences models

Causal inference using the difference-in-differences (DD) method relies on the untestable assumption of parallel counterfactual trends across units that are assigned to different treatments. To facilitate the application...Read more...

SERC/Urban and Spatial Programme Discussion Paper

Matching Firms and Workers in a Field Experiment in Ethiopia

Do matching frictions affect youth employment in developing countries? We organise job fairs in Addis Ababa, to match firms with a representative sample of young, educated job-seekers. We create very few jobs: one for ap...Read more...

Journal article

American Economic Review:

Is modern technology responsible for jobless recoveries?

Since the early 1990s, recoveries from recessions in the US have been plagued by weak employment growth. We investigate whether a similar problem afflicts other developed economies, and whether technology is a culprit. W...Read more...

CEP discussion paper

Aggregate recruiting intensity

We develop a model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with micro evidence, in the model fast-grow...Read more...

CEP discussion paper

The impact of contract enforcement costs on outsourcing and aggregate productivity

Legal institutions affect economic outcomes, but how much? This paper documents how costly supplier contract enforcement shapes firm boundaries, and quantifies the impact of this transaction cost on aggregate productivit...Read more...

CEP discussion paper

The objective benefits of subjective well-being

The aim of this paper is to survey the 'hard' evidence on the effects of subjective well-being. In doing so, we complement the evidence on the determinants of well-being by showing that human well-being also affects outc...Read more...

CEP discussion paper

A model of aggregate demand and unemployment

We present a static model of aggregate demand and unemployment. The economy has a nonproduced good, a produced good, and labor. Product and labor markets have matching frictions. A general equilibrium is a set of prices,...Read more...

CEP discussion paper

Selection into Trade and Wage Inequality

This paper analyzes the impact of trade integration on wage inequality when there is heterogeneity across both workers and firms. By incorporating labor assignment into the heterogeneous firms literature I develop a mode...Read more...

CentrePiece article

Jobs in a recession

This article is based on a paper that models unemployment as the result of matching frictions and job rationing. Job rationing is a shortage of jobs arising naturally in an economic equilibrium from the combination of so...Read more...

CEP discussion paper

Fiscal Multipliers over the Business Cycle

This paper illustrates why fiscal policy becomes more effective as unemployment rises in recessions. The theory is based on the equilibrium unemployment model of Michaillat (forthcoming), in which jobs are rationed in re...Read more...

CEP discussion paper

Optimal Unemployment Insurance Over the Business Cycle

This paper characterizes optimal unemployment insurance (UI) over the business cycle using a model of equilibrium unemployment in which jobs are rationed in recession. It offers a simple optimal UI formula that can be ap...Read more...

CEP discussion paper

Does High Involvement Management Lead to Higher Pay?

Using nationally representative survey data for Finnish employees linked to register data on their wages and work histories we find wage effects of high involvement management (HIM) practices are generally positive and s...Read more...

CEP discussion paper

Communal Responsibility and the Coexistence of Money and Credit Under Anonymous Matching

Communal responsibility, a medieval institution studied by Greif (2006), supported the use of credit among European merchants in the absence of modern enforcement technologies. This paper shows how this mechanism helps t...Read more...

CEP discussion paper

Do Matching Frictions Explain Unemployment? Not in Bad Times

This paper models unemployment as the result of matching frictions and job rationing. Job rationing is a shortage of jobs arising naturally in an economic equilibrium from the combination of some wage rigidity and dimini...Read more...

Blog

LSE British Politics and Policy:

LSE Centre for Economic Performance ? all election analyses are now available

The complete series of Election Analyses from the Centre for Economic Performance (CEP) is now available, summarising research evidence on some of the key policy battlegrounds of the 2010 UK General Election. The followi...Read more...

CEP discussion paper

Imperfect Competition in the Labour Market

It is increasingly recognized that labour markets are pervasively imperfectly competitive, that there are rents to the employment relationship for both worker and employer. This chapter considers why it is sensible to th...Read more...

CEP discussion paper

Recovering the Sunk Costs of R&D: the Moulds Industry Case

Sunk costs for R&D are an important determinant of the level of innovation in the economy. In this paper I recover them using a Markov equilibrium framework. The contribution is twofold. First, a model of industry dynami...Read more...

SERC/Urban and Spatial Programme Discussion Paper

Why Do Some Firms Undertake R&D Whereas Others Do Not?

Data for the UK show Northern Ireland remains at the bottom of the productivity league table, and that its R&D performance is consistently amongst the lowest across the UK regions. This paper analyses the data from a sur...Read more...

CEP discussion paper

Hot and Cold Seasons in the Housing Market

Every year during the second and thirdquarters (the ?hot season?) housing markets in the UK and the US experience systematic above-trend increases in both prices and transactions. During the fourth and first quarters (th...Read more...

CEP discussion paper

The Macroeconomic Role of Unemployment Compensation

The standard motivation for unemployment compensation is consumption smoothing and most papers in the literature have analyzed trade-offs involving consumption smoothing and moral hazard. This paper shows how such policy...Read more...

CEP discussion paper

Competing for Contacts: Network Competition, Trade Intermediation and Fragmented Duopoly

A two-sided, pair-wise matching model is developed to analyse the strategic interaction between two information intermediaries who compete in commission rates and network size, giving rise to a fragmented duopoly market ...Read more...

CEP discussion paper

Information Costs, Networks and Intermediation in International Trade

This paper presents a pairwise matching model with two-sided information asymmetry to analyse the impact of information costs on endogenous network building and matching by information intermediaries. The framework innov...Read more...

CEP discussion paper

On the Extent of Re-Entitlement Effects in Unemployment Compensation

A dynamic labor matching economy is presented, in which the unemployed are either entitled to unemployment insurance (UI) or unemployment assistance (UA), and the employees are either eligible for UI or UA upon future se...Read more...

CEP discussion paper

The Shimer Puzzle and the Correct Identification of Productivity Shocks

Shimer (2005a) claims that the Mortensen-Pissarides search model of unemployment lacks an ampiflication mechanism because it cannot generate the observed business cycle fluctuations in unemployment given labor productivi...Read more...

CEP discussion paper

Search Frictions, Real Rigidities and Inflation Dynamics

The standard New Keynesian model suffers from the so-called .macro-micro pricing conflict: in order to match the dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price...Read more...

CEP discussion paper

Productivity, Aggregate Demand and Unemployment Fluctuations

This paper presents new empirical evidence on the cyclical behavior of US unemployment that poses a challenge to standard search and matching models. The correlation between cyclical unemployment and the cyclical compone...Read more...

CEP discussion paper

The Beveridge Curve

The Beveridge curve depicts a negative relationship between unemployed workers and job vacancies, a robust finding across countries. The position of the economy on the curve gives an idea as to the state of the labour ma...Read more...

CEP discussion paper

Labor Search and Matching in Macroeconomics

The labor search and matching model plays a growing role in macroeconomic analysis. This paper provides a critical, selective survey of the literature. Four fundamental questions are explored: how are unemployment, job v...Read more...

CEP discussion paper

Search and Matching Frictions and Optimal Monetary Policy

I analyze optimal monetary policy in an economy with search and matching frictions in the labor market and staggered nominal wage and price contracts. In this framework, as opposed to the standard New Keynesian model, pr...Read more...

CEP discussion paper

Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution

A general equilibrium model of individual specialization is presented in which agents trade off the productivity and price implications of producing a narrower range of goods. Agents with highly specific skills turn out ...Read more...

CEP discussion paper

Evaluating the Performance of the Search and Matching Model

Does the search and matching model fit aggregate U.S. labor market data? While the model has become an important tool of macroeconomic analysis, recent literature pointed to some failures in accounting for the data. This...Read more...

CEP discussion paper

Cities, Matching and the Productivity Gains of Agglomeration

The striking geographical concentration of economic activities suggests that there are substantial benefits to agglomeration. However, the nature of those benefits remains unclear. In this paper we take advantage of a ne...Read more...

CEP discussion paper

Scale Effects in Markets with Search

Reduced-form tests of scale effects in markets with search, run when aggregate matching functions are estimated, may miss important scale effects at the micro level, because of the reactions of job searchers. A semi-stru...Read more...

CEP discussion paper

A Test Between Unemployment Theories Using Matching Data

This paper tests whether aggregate matching is consistent with unemployment being mainly due to search frictions or due to job queues. Using U.K. data and correcting for temporal aggregation bias, estimates of the random...Read more...

CEP discussion paper

Trade and Industrial Location with Heterogeneous Labor

We show in the framework of a new economic geography model that when labor is heterogenous and productivity depends on the quality of the match between job and worker, trade liberalization may lead to industrial agglomer...Read more...

CEP discussion paper

Spanish Unemployment Persistence and the Ladder Effect

This paper aims to examine unemployment persistence in Spain by the soucalled 'ladder' effect. This arises when highly-skilled workers who do not find a job matching their skills accept jobs which previously were occup...Read more...

CEP discussion paper

The Union Membership Wage Premium: An Analysis Using Propensity Score Matching

This paper estimates the size of the union membership wage premium by comparing wage outcomes for unionised workers with 'matched' non-unionised workers. The method assumes selection on observables. For this identifyin...Read more...

CEP discussion paper

Company Start-Up Costs and Employment

I study the role of company start-up costs for employment performance. The model is search equilibrium with a new concept for firms. Agents have an innate managerial ability and make a career choice to become either mana...Read more...

CEP discussion paper

Externalities in the Matching of Workers and Firms in Britain

We provide empirical evidence on the nature of spatial externalities in a matching model for the UK. We use a monthly panel of outflows, unemployment and vacancy stocks data from the registers at Jobcentres in the UK; th...Read more...

CEP discussion paper

Explaining Currency Crises: A Duration Model Approach

This paper is an empirical investigation into the duration of exchange rate episodes characterized by the absence of speculative attacks. We estimate a duration model for OECD countries during the 1970-1997 period. Speci...Read more...

CEP discussion paper

Looking Into the Black Box: A Survey of the Matching Function

We survey the microfoundations, empirical evidence and estimation issues underlying the aggregate matching function. Several microeconomic matching mechanisms have been suggested in the literature with some successes but...Read more...