Research

Working Papers

The Effect of the Minimum Wage on Occupational Mobility (Draft Available Upon Request)

Abstract: While ongoing debate concerns the employment effect of the minimum wage, little is known about the effect of the minimum wage on worker’s occupational mobility. We first show that the minimum wage has non-trivial effect on occupational mobility for younger, less-skilled workers. Motivated by the empirical analysis, we build a continuous time search-and-matching model with heterogeneous agents and occupations. We show that occupational mobility is increasing in skill mismatch and wage inequality arise in the stationary equilibrium. The model predicts negative effect of the minimum wage on occupational mobility for low ability workers and little effects for high ability workers. Based on a counterfactual study, we show that this effect dampens the reduction in wage inequality of a 50% increase in minimum wage by as much as 13%. Consistent with the recent evidence, our findings suggest that the contribution of the minimum wage to the wage inequality might be less than previously estimated.

 

Unsecured Debt and Occupational Mobility (Draft Available Upon Request)

Abstract: In this paper we theoretically study the relation between revolving credit and occupational mobility. We construct a new monetary model featuring multiple occupations and heterogeneous workers. Our model generates sub markets depending on occupation and learning status. Wages are different across sub markets. The model features multiple equilibria for a wide range of parameters. We show that there are equilibria across which occupation mobility and unsecured debt accessibility are positively correlated. We calibrate a version of the model to the US economy and show that about 20% of the variation in occupational mobility can be explained by changes in credit market.

 

Work in Progress

The Employment Effect of the Minimum Wage Under Unregulated Effort (Joint with Christine Braun and Peter Rupert. Draft Available Upon Request)

Abstract: This paper studies the employment effect of the minimum wage under heterogeneous workers and incomplete market. Workers have access to extra effort that cannot be contracted on. We show that in this environment the minimum wage has small disemployment effect due to two factors: extra effort and time duration. An minimum wage increase induces the workers to exert more effort than than the case without minimum wage to avoid separation. Further, the probability any worker is displaced in the presence of the minimum wage is strictly less than in any finite time interval. We simulate the model and show that the estimated employment effect of the minimum wage is insignificant for a range of parameterizations.