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.

Behavioral Perspectives on Organizational Change: Practice Adoption, Product Culling, and Technological Search

This dissertation explores the complex process of organizational change, applying a behavioral lens to understand change in processes, products, and search behaviors. Chapter 1 examines new practice adoption, exploring factors that predict the extent to which routines are adopted “as designed” within the organization. Using medical record data obtained from the hospital’s Electronic Health Record (EHR) system I develop a novel measure of the “gap” between routine “as designed” and routine “as realized.” I link this to a survey administered to the hospital’s professional staff following the adoption of a new EHR system and find that beliefs about the expected impact of the change shape fidelity of the adopted practice to its design. This relationship is more pronounced in care units with experienced professionals and less pronounced when the care unit includes departmental leadership. This research offers new insights into the determinants of routine change in organizations, in particular suggesting the beliefs held by rank-and-file members of an organization are critical in new routine adoption. Chapter 2 explores changes to products, specifically examining culling behaviors in the mobile device industry. Using a panel of quarterly mobile device sales in Germany from 2004-2009, this chapter suggests that the organization’s response to performance feedback is conditional upon the degree to which decisions are centralized. While much of the research on product exit has pointed to economic drivers or prior experience, these central finding of this chapter—that performance below aspirations decreases the rate of phase-out—suggests that firms seek local solutions when doing poorly, which is consistent with behavioral explanations of organizational action. Chapter 3 uses a novel text analysis approach to examine how the allocation of attention within organizational subunits shapes adaptation in the form of search behaviors in Motorola from 1974-1997. It develops a theory that links organizational attention to search, and the results suggest a trade-off between both attentional specialization and coupling on search scope and depth. Specifically, specialized unit attention to a more narrow set of problems increases search scope but reduces search depth; increased attentional coupling also increases search scope at the cost of depth. This novel approach and these findings help clarify extant research on the behavioral outcomes of attention allocation, which have offered mixed results.

Grabbing Your Attention: The Impact of Finding a First Target in Multiple-Target Search

For over 50 years, the Satisfaction of Search effect, and more recently known as the Subsequent Search Miss (SSM) effect, has plagued the field of radiology. Defined as a decrease in additional target accuracy after detecting a prior target in a visual search, SSM errors are known to underlie both real-world search errors (e.g., a radiologist is more likely to miss a tumor if a different tumor was previously detected) and more simplified, lab-based search errors (e.g., an observer is more likely to miss a target ‘T’ if a different target ‘T’ was previously detected). Unfortunately, little was known about this phenomenon’s cognitive underpinnings and SSM errors have proven difficult to eliminate. However, more recently, experimental research has provided evidence for three different theories of SSM errors: the Satisfaction account, the Perceptual Set account, and the Resource Depletion account. A series of studies examined performance in a multiple-target visual search and aimed to provide support for the Resource Depletion account—a first target consumes cognitive resources leaving less available to process additional targets.

To assess a potential mechanism underlying SSM errors, eye movements were recorded in a multiple-target visual search and were used to explore whether a first target may result in an immediate decrease in second-target accuracy, which is known as an attentional blink. To determine whether other known attentional distractions amplified the effects of finding a first target has on second-target detection, distractors within the immediate vicinity of the targets (i.e., clutter) were measured and compared to accuracy for a second target. To better understand which characteristics of attention were impacted by detecting a first target, individual differences within four characteristics of attention were compared to second-target misses in a multiple-target visual search.

The results demonstrated that an attentional blink underlies SSM errors with a decrease in second-target accuracy from 135ms-405ms after detection or re-fixating a first target. The effects of clutter were exacerbated after finding a first target causing a greater decrease in second-target accuracy as clutter increased around a second-target. The attentional characteristics of modulation and vigilance were correlated with second- target misses and suggest that worse attentional modulation and vigilance are predictive of more second-target misses. Taken together, these result are used as the foundation to support a new theory of SSM errors, the Flux Capacitor theory. The Flux Capacitor theory predicts that once a target is found, it is maintained as an attentional template in working memory, which consumes attentional resources that could otherwise be used to detect additional targets. This theory not only proposes why attentional resources are consumed by a first target, but encompasses the research in support of all three SSM theories in an effort to establish a grand, unified theory of SSM errors.