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Loews Philadelphia, Washington C
Hosted By:
Society for Economic Dynamics
technological advances by the firm, or its competitors. We combine the firm-level
measure of the value of innovation developed in Kogan, Papanikolaou, Seru, and
Stoffman (2016) with administrative employer-employee matched data. We find that
technological innovation is associated with an increase in the dispersion of labor income growth, even for the firm's own workers. We find an economically significant increase in the left tail of income growth for the highest paid workers in innovating firms. The empirical results are consistent with the view that innovation displaces part of workers' human capital. In particular, we find that the increase in the left tail is larger for older relative to younger workers; is driven by process innovation; and mostly reflects the income dynamics of workers that leave the firm rather than stay.
New Approaches in Measuring Uncertainty
Paper Session
Saturday, Jan. 6, 2018 12:30 PM - 2:15 PM
- Chair: David William Berger, Northwestern University
Firms’ Uncertainty and Ambiguity
Abstract
Businesses deal with uncertainty every day. Hiring, investment and pricing decisions are difficult in part because future demand, cost, competition and regulation cannot be perfectly foreseen. While economists have long studied the effects of uncertainty on business decisions in theory, measurement of those effects is in its infancy. This project tackles this challenge head on by asking firms in the IFO’s Business Cycle Survey what their views on future sales growth as well as assessments of their likelihood are and this new survey is one of the first anywhere to elicit perceptions of Knightian uncertainty in the field. It provides crucial data to test hypotheses on behavior under such uncertainty as well as allowing us to measure the real effects of uncertainty and ambiguity shocks.Technological Innovation and the Distribution of Labor Income Growth
Abstract
We examine how the distribution of worker earnings growth shifts following majortechnological advances by the firm, or its competitors. We combine the firm-level
measure of the value of innovation developed in Kogan, Papanikolaou, Seru, and
Stoffman (2016) with administrative employer-employee matched data. We find that
technological innovation is associated with an increase in the dispersion of labor income growth, even for the firm's own workers. We find an economically significant increase in the left tail of income growth for the highest paid workers in innovating firms. The empirical results are consistent with the view that innovation displaces part of workers' human capital. In particular, we find that the increase in the left tail is larger for older relative to younger workers; is driven by process innovation; and mostly reflects the income dynamics of workers that leave the firm rather than stay.
Uncertainty Shocks as Second-moment News Shocks
Abstract
This paper provides new empirical evidence on the relationship between aggregate uncertainty and the macroeconomy. We identify uncertainty shocks using methods from the literature on news shocks, following the observation that second-moment news is a shock to uncertainty. The key distinction we draw is between realized volatility { the realization of large shocks { and forward-looking uncertainty { the expectation that future shocks will be large. According to a wide range of VAR specifications, shocks to realized stock market volatility are contractionary, while shocks to uncertainty have no significant effect on the economy. In line with those findings, investors have historically paid large premia to hedge shocks to realized volatility, but the premia associated with shocks to uncertainty have not been statistically different from zero. We argue that these facts, and the VAR identification, are consistent with a simple model in which output growth is skewed left. Aggregate volatility matters, but it is the realization of volatility, rather than uncertainty about the future, that seems to be associated with declines.JEL Classifications
- D2 - Production and Organizations
- G1 - General Financial Markets