Essays on Job Search and Labor Market Dynamics

This dissertation consists of three separate essays on job search and labor market dynamics. In the first essay, “The Impact of Labor Market Conditions on Job Creation: Evidence from Firm Level Data”, I study how much changes in labor market conditions reduce employment fluctuations over the business cycle. Changes in labor market conditions make hiring more expensive during expansions and cheaper during recessions, creating counter-cyclical incentives for job creation. I estimate firm level elasticities of labor demand with respect to changes in labor market conditions, considering two margins: changes in labor market tightness and changes in wages. Using employer-employee matched data from Brazil, I find that all firms are more sensitive to changes in wages rather than labor market tightness, and there is substantial heterogeneity in labor demand elasticity across regions. Based on these results, I demonstrate that changes in labor market conditions reduce the variance of employment growth over the business cycle by 20% in a median region, and this effect is equally driven by changes along each margin. Moreover, I show that the magnitude of the effect of labor market conditions on employment growth can be significantly affected by economic policy. In particular, I document that the rapid growth of the national minimum wages in Brazil in 1997-2010 amplified the impact of the change in labor market conditions during local expansions and diminished this impact during local recessions.

In the second essay, “A Framework for Estimating Persistence of Local Labor

Demand Shocks”, I propose a decomposition which allows me to study the persistence of local labor demand shocks. Persistence of labor demand shocks varies across industries, and the incidence of shocks in a region depends on the regional industrial composition. As a result, less diverse regions are more likely to experience deeper shocks, but not necessarily more long lasting shocks. Building on this idea, I propose a decomposition of local labor demand shocks into idiosyncratic location shocks and nationwide industry shocks and estimate the variance and the persistence of these shocks using the Quarterly Census of Employment and Wages (QCEW) in 1990-2013.

In the third essay, “Conditional Choice Probability Estimation of Continuous- Time Job Search Models”, co-authored with Peter Arcidiacono and Arnaud Maurel, we propose a novel, computationally feasible method of estimating non-stationary job search models. Non-stationary job search models arise in many applications, where policy change can be anticipated by the workers. The most prominent example of such policy is the expiration of unemployment benefits. However, estimating these models still poses a considerable computational challenge, because of the need to solve a differential equation numerically at each step of the optimization routine. We overcome this challenge by adopting conditional choice probability methods, widely used in dynamic discrete choice literature, to job search models and show how the hazard rate out of unemployment and the distribution of the accepted wages, which can be estimated in many datasets, can be used to infer the value of unemployment. We demonstrate how to apply our method by analyzing the effect of the unemployment benefit expiration on duration of unemployment using the data from the Survey of Income and Program Participation (SIPP) in 1996-2007.

Long-term equity anticipation securities and stock market volatility dynamics

Recent empirical findings suggest that the long-run dependence in U.S. stock market volatility is best described by a slowly mean-reverting fractionally integrated process. The present study complements this existing time-series-based evidence by comparing the risk-neutralized option pricing distributions from various ARCH-type formulations. Utilizing a panel data set consisting of newly created exchange traded long-term equity anticipation securities, or leaps, on the Standard and Poor's 500 stock market index with maturity times ranging up to three years, we find that the degree of mean reversion in the volatility process implicit in these prices is best described by a Fractionally Integrated EGARCH (FIEGARCH) model. © 1999 Elsevier Science S.A. All rights reserved.

Eco-evolutionary feedbacks in community and ecosystem ecology: interactions between the ecological theatre and the evolutionary play.

Interactions between natural selection and environmental change are well recognized and sit at the core of ecology and evolutionary biology. Reciprocal interactions between ecology and evolution, eco-evolutionary feedbacks, are less well studied, even though they may be critical for understanding the evolution of biological diversity, the structure of communities and the function of ecosystems. Eco-evolutionary feedbacks require that populations alter their environment (niche construction) and that those changes in the environment feed back to influence the subsequent evolution of the population. There is strong evidence that organisms influence their environment through predation, nutrient excretion and habitat modification, and that populations evolve in response to changes in their environment at time-scales congruent with ecological change (contemporary evolution). Here, we outline how the niche construction and contemporary evolution interact to alter the direction of evolution and the structure and function of communities and ecosystems. We then present five empirical systems that highlight important characteristics of eco-evolutionary feedbacks: rotifer-algae chemostats; alewife-zooplankton interactions in lakes; guppy life-history evolution and nutrient cycling in streams; avian seed predators and plants; and tree leaf chemistry and soil processes. The alewife-zooplankton system provides the most complete evidence for eco-evolutionary feedbacks, but other systems highlight the potential for eco-evolutionary feedbacks in a wide variety of natural systems.

Intraspecific variation in a predator affects community structure and cascading trophic interactions.

Intraspecific phenotypic variation in ecologically important traits is widespread and important for evolutionary processes, but its effects on community and ecosystem processes are poorly understood. We use life history differences among populations of alewives, Alosa pseudoharengus, to test the effects of intraspecific phenotypic variation in a predator on pelagic zooplankton community structure and the strength of cascading trophic interactions. We focus on the effects of differences in (1) the duration of residence in fresh water (either seasonal or year-round) and (2) differences in foraging morphology, both of which may strongly influence interactions between alewives and their prey. We measured zooplankton community structure, algal biomass, and spring total phosphorus in lakes that contained landlocked, anadromous, or no alewives. Both the duration of residence and the intraspecific variation in foraging morphology strongly influenced zooplankton community structure. Lakes with landlocked alewives had small-bodied zooplankton year-round, and lakes with no alewives had large-bodied zooplankton year-round. In contrast, zooplankton communities in lakes with anadromous alewives cycled between large-bodied zooplankton in the winter and spring and small-bodied zooplankton in the summer. In summer, differences in feeding morphology of alewives caused zooplankton biomass to be lower and body size to be smaller in lakes with anadromous alewives than in lakes with landlocked alewives. Furthermore, intraspecific variation altered the strength of the trophic cascade caused by alewives. Our results demonstrate that intraspecific phenotypic variation of predators can regulate community structure and ecosystem processes by modifying the form and strength of complex trophic interactions.

A range-wide experiment to investigate nutrient and soil moisture interactions in loblolly pine plantations

© 2015 by the authors.The future climate of the southeastern USA is predicted to be warmer, drier and more variable in rainfall, which may increase drought frequency and intensity. Loblolly pine (Pinus taeda) is the most important commercial tree species in the world and is planted on ~11 million ha within its native range in the southeastern USA. A regional study was installed to evaluate effects of decreased rainfall and nutrient additions on loblolly pine plantation productivity and physiology. Four locations were established to capture the range-wide variability of soil and climate. Treatments were initiated in 2012 and consisted of a factorial combination of throughfall reduction (approximate 30% reduction) and fertilization (complete suite of nutrients). Tree and stand growth were measured at each site. Results after two growing seasons indicate a positive but variable response of fertilization on stand volume increment at all four sites and a negative effect of throughfall reduction at two sites. Data will be used to produce robust process model parameterizations useful for simulating loblolly pine growth and function under future, novel climate and management scenarios. The resulting improved models will provide support for developing management strategies to increase pine plantation productivity and carbon sequestration under a changing climate.