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Research

Working Papers

Sector-Specific Human Capital and the Effects of Job Displacement

(Job Market Paper) 2017

Job loss has a permanent negative effect on life-time earnings and, in general, on labormarket outcomes of workers. This negative effect is larger if job loss happens in recessionthan the case of job loss during expansion. In this paper, using linked employer–employeedata of Germany from 1975 to 2014, I show that about 55% of the variation in earning lossis accounted for by negative sectoral performance. Intuitively, earning losses associated withjob loss are greater during recessions, because the average displaced worker in a recessioncomes from an industry with poor performance relative to the average industry which makessector-specific skills less valuable. In other words, recessions are not only periods of more jobloss but also periods with more sectors of very poor performance. Hence, workers displacedin recessions are, on average, more likely to struggle with lack of demand for their skills.By building a model of sector-specific human capital, it is shown how loss of sector-specific human capital can explain huge and persistent earning and wage loss of displacedworkers. In addition, it is shown that concentration of displaced workers in severely decliningsectors during recessions is a potential explanation for larger earning loss in recessions thanjob-losses in expansions.


Uncertainty and Firm Dynamics

2014

Firms experience great volatility in their sales, profit and business conditions. Such fluctuations in uncertainty have important implications for further investment, inventory management and more basically on entry and exit decisions of firms. Developing a dynamic general equilibrium model of firm dynamics, I study the effect of productivity shocks on the endogenous decision of firms to enter, exit and the employment size of their production. The shocks are modeled at three levels: aggregate, sectoral and idiosyncratic level. Existence of fixed labor adjustment cost builds a region of inaction for the firms. Firms will enter, exit and hire/fire only when business conditions are too good or too bad. The salient feature of my model is that new entrants endogenously decide the size of their production. Hence I can study the size distribution of new entrants as well as all firms in different sectors and different economies. Directly computing the rational expectation equilibrium of the model suffers from the curse of dimensionality.


How Does Oil Prices Affect Manufacturing in Oil Producing Countries?

with Seyed Ali Madanizadeh 2012

Classical answer to this question is a decline explained by so called theory of Dutch disease: an increase in revenues from natural resources will make a given nation's currency stronger compared to that of other nations (manifest in an exchange rate), resulting in the nation's other exports becoming more expensive for other countries to buy, making the manufacturing sector less competitive. Although the intensive margin of trade, the value of exports of each firm, decrease in response to oil price increase which is traditionally explained by the Dutch disease theory, the extensive margin of trade is moving in the other way. Hence the total effect of oil price change on the manufacturing sector of oil producing countries is not clear. Imperfect capital market dampens the effect of Dutch disease through extensive margin of trade. When oil prices goes up, domestic firms are less competitive in foreign market due to the change in exchange rates so they export less, but due to entrance of new firms to export market, more goods are exported.