Publications - Under review

We propose a theory that analyzes how a workers’ asset holdings affect their job productivity. In a labor market with uninsurable risk, workers choose to direct their job search trading off productivity and wages against unemployment risk. Workers with low asset holdings have a precautionary job search motive, they direct their search to low productivity jobs because those offer a low risk at the cost of low productivity and a low wage. Our main theoretical contribution shows that the presence of consumption smoothing can reconcile the directed search model with negative duration-dependence on wages, a robust empirical regularity that the canonical directed search model cannot rationalize. We calibrate the infinite horizon economy and find this mechanism to be quantitatively important. We evaluate a tax financed unemployment insurance (UI) scheme and analyze how it affects welfare. Aggregate welfare is inverted U-shaped in benefits: the insurance effect UI dominates the incentive effects for low levels of benefits and vice versa for high benefits. In addition, when UI increases, total production falls in the economy while worker productivity increases. Finally, we compare a one- off severance payment with per-period benefits and find that per-period benefits generate superior welfare for low levels of benefits and inferior welfare for high benefits.

We combine information from the British Household Panel Study (BHPS) and the UK Longitudinal Household Study (UKHLS, a.k.a. Understanding Society) to construct consistent time series of aggregate worker stocks, worker flows and earnings in the UK over the 1992-2017. We propose a method to harmonise data between the BHPS and UKHLS, which we validate by checking the consistency of some of our headline time series with equivalent series produced from other sources, notably by the Office for National Statistics (ONS). In addition to drawing a detailed aggregate picture of the UK labour market over the past two and a half decades, we use our constructed dataset to compare the impact of industry, occupation and employer tenure on wages in the UK. We find that returns to occupation tenure are substantial. All else equal, 5 years of occupation tenure are associated with a 3.3% increase in wages. We also find that industry tenure plays a non-negligible part in driving wage growth.

  • The Effect of Trade on Workers' Earnings: Role of Unemployment (with Konstantin Egorov), Rej & R, International Economic Review

Draft is available upon request

Working in Paper


We investigate the welfare consequences of turbulence risk—the risk of skill loss coinciding with involuntary layoffs—on the labour market outcomes in the presence of imperfect financial markets and search frictions. We build a tractable dynamic heterogeneous agents model with directed search, imperfect financial markets, and uninsurable persistent labor market risk. We calibrate our model to the US economy, matching new empirical facts on the joint impact of turbulence risk and wealth on re-employment wages and unemployment duration. We measure the welfare loss of unemployment transitions and quantify the impact of each channel. We find the fall in wealth upon re-employment has the highest impact on welfare changes among the other channels. Finally, we examine the welfare gain from alternative policies.

This paper investigates the importance of credit market frictions on labour market outcomes. I build a tractable search and matching model of the labour market with firm dynamics and heterogeneity in productivity and size. Firms produce output using labour, which they hire in a frictional market modelled by a directed search approach, and capital which they rent period-by-period. First, I show that the interaction of search and financial frictions slows down the reallocation of labour and capital from low productivity to high productivity firms and therefore prolongs the recession following a financial shock. Second, I find that the credit tightening reduces the net employment of large and productive firms more than small and unproductive firms, consistent with recent empirical findings.Third, I find that the introduction of financial frictions enhances the ability of the model to explain the fluctuation and persistence observed in output and labour market flows during the great recession. In fact, the model can account for 50% of the increase in unemployment during the 2008-2010 recession.


  • Constrained Career Choice: The Trade-off between Assets and Skills (with Jan Eeckhout and Peter Spital)

Draft is available upon request, 

Work in Progress
  • Firm-Level Debt and Employment (with Mikael Carlsson and Oskar Skans)