Job Market Candidate
Department of Economics
579 Serra Mall
Stanford, CA 94305
Job Market Paper|
Do R&D Tax Credits Create Jobs?
This paper investigates the employment effects of state tax credits for research and development (R&D), a large and widely-used policy tool. Using confidential micro data from the U.S. Census Bureau, I show that state R&D tax credits increase state employment growth. The increased in-state employment growth is not due to R&D-performing firms shifting employment across states in response to differential tax incentives. Rather, total employment growth at these firms increases. Additionally, greater in-state employment growth does not come at the expense of neighboring states. This is surprising in light of previous research which found that the credits increase in-state R&D spending but that all of the increase is offset by decreased R&D spending in neighboring states. I find no similar effect with respect to employment growth. A plausible explanation for my results is that state R&D tax credits cause increased innovation in the states which offer them, as the tax credits are associated with higher R&D investment, patenting, and productivity.
Do Innovative Firms Offshore Less?
This paper provides causal evidence of a link between innovation and offshoring. Linking confidential U.S. Census micro data on foreign trade transactions, production, and R&D expenditures, and using R&D state tax credits to instrument for firm R&D investment, I find that over the past 20 years more R&D-intensive firms engage in less offshoring. I explore several potential mechanisms for this finding, showing that the dominant force seems to be that high-tech firms use higher quality inputs which are complementary to domestic production.
Have R&D Spillovers Changed?
(with Nicholas Bloom and John Van Reenen) NBER Working Paper 24622
This paper revisits the results of Bloom, Schankerman, and Van Reenen (2013) examining the impact of R&D on the performance of US firms, especially through spillovers. We extend their analysis to include an additional 15 years of data through 2015, and update the measures of firms' interactions in technology space and product market space. We show that the magnitude of R&D spillovers appears to have been broadly similar in the second decade of the 21st Century as it was in the mid-1980s. However, there does seem to have been some increase in the wedge between marginal social returns to R&D and marginal private returns with the ratio of marginal social to private returns increasing to a factor of 4 from 3. There is certainly no evidence that the divergence between public and private return has narrowed. Positive spillovers appeared to increase in the 1995-2004 boom.
Turbulence, Firm Decentralization and Growth in Bad Times
(with Philippe Aghion, Nicholas Bloom, Raffaella Sadun, and John Van Reenen) NBER Working Paper 23354
What is the optimal form of firm organization during "bad times"? On the one hand, the greater turbulence following macro shocks may benefit decentralized firms because the value of local information increases (the "localist" view). On the other hand, the need to make tough decisions may favor centralized firms (the "centralist" view). Using two large micro datasets on firm decentralization from ten OECD countries and US administrative data, we find that firms that delegated more power from the Central Headquarters to local plant managers prior to the Great Recession out-performed their centralized counterparts in sectors that were hardest hit by the subsequent crisis. Using direct measures of turbulence based on product churn and stock market volatility, we show that the localist mechanism dominates. This conclusion is robust to alternative explanations such as managerial fears of bankruptcy and changing coordination costs. Although decentralization will be sub-optimal in many environments, countries with
more decentralized firms (like the US) weathered the 2008-09 Great Recession better than their more centralized counterparts (accounting for about 15 percent of international differences in post-crisis GDP
Business-Level Expectations and Uncertainty
(with Nicholas Bloom, Steven J. Davis, Lucia Foster, Scott Ohlmacher, and Itay Saporta-Eksten)
The Census Bureau's 2015 Management and Organizational Practices Survey collected
innovative 5-bin data on own future outcomes and probabilities for shipments, employment,
capital and materials expenditures at 35,000 manufacturing plants. About 85% of plants provide
logically sensible responses to the 5-bin questions, suggesting that most managers can form and
express (subjective) probability distributions. The other 15% of plants have lower productivity,
employment, wages, managerial education, structured management scores, and multinational
ownership. First and second moments of plant-level subjective probability distributions covary
strongly with first and second moments, respectively, of historical outcomes, suggesting that our
subjective expectations data are well founded. Finally, our plant-level subjective uncertainty
measures correlate positively with realized stock-return volatility, option-implied volatility and
analyst disagreement about future earnings for the plant's parent firm and for the median publicly
listed firm in the plant's industry.
Work In Progress
Outsourcing, Occupational and Industrial Concentration
(with Nicholas Bloom and Audrey Guo)
We use data from the U.S. Bureau of Labor Statistics and U.S. Census Bureau to investigate the concentration of firms, occupations, and industries over time. We find strong evidence for increased concentration of firms in terms of a secular decrease in the number of occupations and industries in which firms are active. The mean number of 5-digit occupations per establishment has fallen from 6.5 to 5.5 since 2000, with the top 3 occupations now accounting for over 85% of total establishment employment. Firm employment and payroll is increasingly concentrated in a few core industries. We argue that the rise of outsourcing and pressure on firms to focus on their core competencies is driving this concentration of activities within firms. Finally, we argue this could play a role for the rising segregation of employees by income and education across firms.
The Large Firm Pay Premium Redux [slides]
(with Nicholas Bloom, Fatih Guvenen, Ben Smith, Jae Song, and Til von Wachter)
Using two large administrative datasets - Social Security Administration data on all W-2 forms since 1978 and Census Bureau data on all firms since 1976 - we show that the large-firm wage premium (LFWP), defined as the unconditional gap between the average wage earnings of employees in large versus small firms, has declined significantly since the late 1970s. Large firms have paid a significantly higher wage for more than a century, but over the last 40 years this large-firm wage premium has fallen by about 50 percent. Applying the Abowd, Kramarz, and Margolis (1999) framework to the SSA data, we show that this is mainly due to a falling pay premium at large firms, and not due to less worker sorting over time. The effects of the falling LFWP appear to be particularly impactful for lower-paid and less-educated workers. Finally, using the Census data we show that the decline in the LFWP is associated with the emergence of two industry-specific trends, namely the shrinking of the manufacturing sector which has a high LFWP and the growth of the low-paying service sector.
Is Australia One Recession Away from a Disability Blowout? Lessons from Other OECD Countries
(with Richard Burkhauser and Mary Daly) Australian Economic Review (2013)