Research

Abstract: This paper provides evidence that the economic impact of changes in aggregate uncertainty depends on the population's age distribution. The volatility in employment due to uncertainty is lower in US states with a higher population of prime-aged workers. This finding comes from a series of regressions using quarterly state panel data from 2000 to 2017. To address potential endogeneity, the current age distribution is instrumented by past birth rates, and the state-level uncertainty is instrumented by national uncertainty. Regression estimates indicate a quantitatively significant reduction in employment volatility for states with a higher share of prime-age workers. The results are robust across a battery of approaches, including using alternative variable definitions and model specifications, analyzing various state-level control factors, examining dynamics using local projections, and considering labor fluctuations in job gains and losses, unemployment, and participation volatilities.

Abstract: This study examines how global supply- and demand-driven oil shocks affect job flows in U.S. manufacturing sectors from 1980Q3 to 2016Q4, using restricted-access Census data. We analyze the impact of various oil shocks on job creation and destruction using four measures developed by Baumeister and Hamilton (2019) and employ the Smooth Local Projection method. Our findings reveal that demand-driven oil shocks, particularly those related to global economic activity, have more substantial and persistent effects on manufacturing employment compared to supply-driven shocks. These impacts vary significantly across manufacturing sectors. Durable goods industries, especially transportation equipment, are more sensitive to oil price fluctuations, experiencing greater job creation, destruction, and reallocation. In contrast, nondurable sectors show more stable and muted responses. The analysis further identifies energy intensity and capital intensity as key mechanisms explaining the heterogeneous responses across sectors to oil price shocks.

Abstract: This paper investigates the effect of US monetary policy uncertainty (MPU) on firm investment in China. The findings reveal US MPU exerts a significant spillover effect on Chinese firm investment, even after accounting for the effect of China’s MPU. This underscores the role of US MPU as a critical external factor influencing Chinese firms’ investment decisions due to the interconnectedness of cross-country monetary policies and international economic activities. The effect of US MPU is particularly pronounced for China’s firms with a high proportion of international business, significant financial constraints, and elevated default risk. Moreover, the adverse effects intensify during periods of rising US MPU and low economic growth in China. These results remain robust across alternative measures of US MPU and firm investment, subsample analyses, and after addressing potential endogeneity issues.

Abstract: This paper investigates the impact of macroeconomic uncertainty on wage dispersion across skilled and unskilled workers, leveraging county-level data from the United States. We adopt the macroeconomic uncertainty measures constructed by Ludvigson and Ng (2015). With the data from the American Community Survey (ACS) and the Longitudinal Employer-Household Dynamics, we examine the change of county-level wage dispersion following two prominent recessions in the recent two decades – the Great Recession in 2008 and the pandemic recession in 2020. Preliminary evidence indicates that increases in macroeconomic uncertainty are associated with a short-term decline in wage dispersion across counties, particularly among skilled workers - defined as individuals with at least two years of college education. This effect, however, dissipates within a year, with the estimated impact becoming statistically insignificant. In contrast, wage dispersion among unskilled workers - those with less than two years of college - exhibits little to no response to such shocks. To explain these stylized facts, we propose a search model with heterogeneous workers and argue that the precautionary motives hinder upward mobility among high-skill workers, thereby compressing wage dispersion within this group.

Abstract: This paper utilizes the real business cycle (RBC) model to assess the influence of economic uncertainty on demographic-specific labor market volatility. This study builds on Jaimovich, Pruitt, and Siu (2013) who modified the RBC model to account for cyclical age-specific labor demand variations. Using March CPS data from 1964-2010 and considering a secondary technology shock, they found older labor hours to be less volatile after technology demand shocks compared to younger labor. Recent work by Villaverde and Quintana (2020) delves into the connection between uncertainty shocks and business cycles, identifying economic uncertainty shocks as stemming from secondary disruptions in technology innovation and labor supply preference. This paper draws insights from two studies and utilizes quarterly state data from 2000-2017. It integrates a supply preference shock into the age-differentiated RBC model. The underlying assumption is that labor input from the prime working age group is more stable than that of older workers when confronted with uncertainty supply shocks.