Essays on Firm Dynamics and Labor Markets

Abstract

The two chapters of this dissertation explore two central topics of the current policy debate.

The first chapter studies the increase in markups experienced in the US starting from the 1980s. I document new facts on the evolution of markups by cohorts of firms, and I provide evidence that these patterns are linked to knowledge creation and knowledge diffusion. This chapter investigates, through the lens of a structural model, how the size of the technological gap and the speed of catching up with the frontier affect welfare. The quantitative results suggest that knowledge diffuses 38% faster in 2010 than in 1980, and the household experiences a consumption-equivalent welfare gain of 0.29% in an economy in which the quality of innovation and the intensity of knowledge diffusion is set at the 2010 values rather than the 1980 values.

The second chapter investigates the impact of extensions in unemployment benefits duration on labor market sorting. The findings provide support for the hypothesis that unemployment insurance benefits increase wages by improving the employee-employer matches. The results also show bigger effects of unemployment insurance benefits extensions on match quality for those more likely to be liquidity constrained such as women, non-whites, and less-educated workers.