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.

Improving supply chain performance: Real-time demand information and flexible deliveries

In some supply chains, materials are ordered periodically according to local information. This paper investigates how to improve the performance of such a supply chain. Specifically, we consider a serial inventory system in which each stage implements a local reorder interval policy; i.e., each stage orders up to a local basestock level according to a fixed-interval schedule. A fixed cost is incurred for placing an order. Two improvement strategies are considered: (1) expanding the information flow by acquiring real-time demand information and (2) accelerating the material flow via flexible deliveries. The first strategy leads to a reorder interval policy with full information; the second strategy leads to a reorder point policy with local information. Both policies have been studied in the literature. Thus, to assess the benefit of these strategies, we analyze the local reorder interval policy. We develop a bottom-up recursion to evaluate the system cost and provide a method to obtain the optimal policy. A numerical study shows the following: Increasing the flexibility of deliveries lowers costs more than does expanding information flow; the fixed order costs and the system lead times are key drivers that determine the effectiveness of these improvement strategies. In addition, we find that using optimal batch sizes in the reorder point policy and demand rate to infer reorder intervals may lead to significant cost inefficiency. © 2010 INFORMS.

Carbon mitigation costs for the commercial building sector: Discrete-continuous choice analysis of multifuel energy demand

We estimate a carbon mitigation cost curve for the U.S. commercial sector based on econometric estimation of the responsiveness of fuel demand and equipment choices to energy price changes. The model econometrically estimates fuel demand conditional on fuel choice, which is characterized by a multinomial logit model. Separate estimation of end uses (e.g., heating, cooking) using the U.S. Commercial Buildings Energy Consumption Survey allows for exceptionally detailed estimation of price responsiveness disaggregated by end use and fuel type. We then construct aggregate long-run elasticities, by fuel type, through a series of simulations; own-price elasticities range from -0.9 for district heat services to -2.9 for fuel oil. The simulations form the basis of a marginal cost curve for carbon mitigation, which suggests that a price of $20 per ton of carbon would result in an 8% reduction in commercial carbon emissions, and a price of $100 per ton would result in a 28% reduction. © 2008 Elsevier B.V. All rights reserved.

Effect of ritonavir-induced cytochrome P450 3A4 inhibition on plasma fentanyl concentrations during patient-controlled epidural labor analgesia: a pharmacokinetic simulation.

BACKGROUND: Ritonavir inhibition of cytochrome P450 3A4 decreases the elimination clearance of fentanyl by 67%. We used a pharmacokinetic model developed from published data to simulate the effect of sample patient-controlled epidural labor analgesic regimens on plasma fentanyl concentrations in the absence and presence of ritonavir-induced cytochrome P450 3A4 inhibition. METHODS: Fentanyl absorption from the epidural space was modeled using tanks-in-series delay elements. Systemic fentanyl disposition was described using a three-compartment pharmacokinetic model. Parameters for epidural drug absorption were estimated by fitting the model to reported plasma fentanyl concentrations measured after epidural administration. The validity of the model was assessed by comparing predicted plasma concentrations after epidural administration to published data. The effect of ritonavir was modeled as a 67% decrease in fentanyl elimination clearance. Plasma fentanyl concentrations were simulated for six sample patient-controlled epidural labor analgesic regimens over 24 h using ritonavir and control models. Simulated data were analyzed to determine if plasma fentanyl concentrations producing a 50% decrease in minute ventilation (6.1 ng/mL) were achieved. RESULTS: Simulated plasma fentanyl concentrations in the ritonavir group were higher than those in the control group for all sample labor analgesic regimens. Maximum plasma fentanyl concentrations were 1.8 ng/mL and 3.4 ng/mL for the normal and ritonavir simulations, respectively, and did not reach concentrations associated with 50% decrease in minute ventilation. CONCLUSION: Our model predicts that even with maximal clinical dosing regimens of epidural fentanyl over 24 h, ritonavir-induced cytochrome P450 3A4 inhibition is unlikely to produce plasma fentanyl concentrations associated with a decrease in minute ventilation.

Division of labor in frontal eye field neurons during presaccadic remapping of visual receptive fields.

Our percept of visual stability across saccadic eye movements may be mediated by presaccadic remapping. Just before a saccade, neurons that remap become visually responsive at a future field (FF), which anticipates the saccade vector. Hence, the neurons use corollary discharge of saccades. Many of the neurons also decrease their response at the receptive field (RF). Presaccadic remapping occurs in several brain areas including the frontal eye field (FEF), which receives corollary discharge of saccades in its layer IV from a collicular-thalamic pathway. We studied, at two levels, the microcircuitry of remapping in the FEF. At the laminar level, we compared remapping between layers IV and V. At the cellular level, we compared remapping between different neuron types of layer IV. In the FEF in four monkeys (Macaca mulatta), we identified 27 layer IV neurons with orthodromic stimulation and 57 layer V neurons with antidromic stimulation from the superior colliculus. With the use of established criteria, we classified the layer IV neurons as putative excitatory (n = 11), putative inhibitory (n = 12), or ambiguous (n = 4). We found that just before a saccade, putative excitatory neurons increased their visual response at the RF, putative inhibitory neurons showed no change, and ambiguous neurons increased their visual response at the FF. None of the neurons showed presaccadic visual changes at both RF and FF. In contrast, neurons in layer V showed full remapping (at both the RF and FF). Our data suggest that elemental signals for remapping are distributed across neuron types in early cortical processing and combined in later stages of cortical microcircuitry.