Mitigating Monopsony: Occupational mobility and outside options
[with Gregor Schubert and Bledi Taska]
Abstract: To what extent are jobs in other occupations valuable outside options – and how does this mitigate monopsony power in concentrated labor markets? Using new data on occupational mobility from 16 million U.S. resumes, we develop a measure of the value of outside-occupation job options and show that plausibly exogenous shocks to these options have large positive effects on wages. Failing to consider outside-occupation options when estimating the relationship between wages and employer concentration leads to bias and obscures important heterogeneity. We propose two alternative ways of measuring employer concentration which better take into account workers’ ability to change occupation.
Productivity and Pay: Is the Link Broken?
[with Lawrence Summers]
in Facing Up To Low Productivity Growth, Peterson Institute for International Economics, 2019
- Replication data and code.
- Working paper versions: PIIE working paper 18-5, NBER working paper w24165.
- Our shorter pieces about the paper: VoxEU article Feb 2018, Financial Times and Washington Post blogs Nov 2017.
- Video & slides from presentation at PIIE conference "Policy Implications of Sustained Low Productivity Growth", Nov 2017.
- Some media coverage: Grep Ip in the Wall Street Journal, Martin Sandbu in the Financial Times, Noah Smith at Bloomberg, Free Exchange in the Economist.
- Presentation at book launch at PIIE, March 2019: "How should the productivity slowdown affect how we tackle inequality?" (video (15 min), slides, and a Tweet thread summary.)
Abstract: Median compensation in the U.S. has diverged starkly from labor productivity since 1973, and average compensation from productivity since 2000. In this paper, we ask: holding all else equal, to what extent does productivity growth translate into compensation growth for typical American workers? We regress median, average, and production/nonsupervisory compensation growth on productivity growth in various specifications, finding substantial evidence of linkage between productivity and compensation. Over 1973–2016, one percentage point higher productivity growth was associated with 0.7-1 percentage points higher median and average compensation growth and with 0.4-0.7 percentage points higher production/nonsupervisory compensation growth. Further, we do not find strong evidence of co-movement between productivity growth and either the labor share or the mean/median compensation ratio. Our results tend to militate against pure technology-based theories of the productivity-compensation divergence, which would suggest that periods of higher productivity growth should also be periods of higher productivity-pay divergence. They suggest that factors orthogonal to productivity have been acting to suppress typical compensation even as productivity growth has been acting to raise it, and that faster future productivity growth is likely to boost median and average compensation growth close to one-for-one.
Central Bank Independence Revisited: After the financial crisis, what should a model central bank look like?
[with Ed Balls and James Howat]
Harvard Kennedy School Mossavar-Rahmani Center for Business and Government Associate Working Paper No. 67, 2016
- Updated version available as HKS M-RCBG Associate Working Paper No. 87 (2018)
- VoxEU article "Twenty years on: Is there still a case for Bank of England independence?", May 2017
- Video & slides from presentation at Peterson Institute for International Economics event "Central Bank Independence Revisited", April 2018
- Some media coverage: Chris Giles in the Financial Times, Angela Monaghan in the Guardian, Tim Wallace in the Telegraph, BBC, CityAM
Abstract: As central banks have acquired more powers, the trade-off between independence and accountability has become more complex and as a result, the pre-crisis academic consensus around central bank independence has broken down. We argue that a new model of central bank independence is needed. First, we investigate the traditional case for central bank independence. Extending work from the 1980s and 1990s to the present, we show that operational independence of central banks – the ability to choose an instrument to achieve inflation goals - has been associated with significant improvements in price stability. But in advanced economies political independence – a stricter set of criteria ensuring the absence of the possibility for politicians to influence central bank goals or personnel – has not been correlated with inflationary outcomes. This suggests that central banks in advanced economies can sacrifice some political independence without undermining the operational independence that is important in both their monetary policy and financial stability functions. In light of this distinction between political and operational independence, we evaluate the new powers that advanced economy central banks have taken on over recent years, and recommend a set of principles to guide central bank structural reform in systemic risk oversight, macroprudential policy and monetary-fiscal policy coordination.