Research Papers

• Worker Beliefs about Layoff Risk (with Lukas Lehner and Arthur Wickard) Job Market Paper
  Abstract

  Job loss is one of the most costly economic risks workers face, but a firm’s layoff risk is difficult to observe. We document substantial, persistent variation in firm layoff rates, creating scope for workers to change their job loss risk through firm choice. We exploit linked survey, experimental, and administrative data from Austria to examine how unemployed workers perceive and respond to information about firm-level layoff risk. Workers believe that past layoffs are predictive of future risk and prefer jobs at firms with lower historical layoff rates, but have significant misperceptions about which firms are safer. Providing workers with information about firm layoff histories causes them to redirect their search toward historically safer employers. Using a search and matching model, we show that imperfect information distorts equilibrium outcomes: it reverses the compensating differential for layoff risk and raises the average layoff rate by allocating more workers to high-risk firms.

• Monopsony with Insurance (with Arthur Wickard)
  Abstract

  Monopsony power is often measured by interpreting firm wage and labor responses to shocks through static models. But when workers face frictions to changing jobs, employment adjusts gradually and workers respond to changes in the total value of a job—not just the current wage. We develop a general equilibrium dynamic monopsony model where firms contract with risk-averse workers over idiosyncratic shocks. This allows us to model the shock-identified labor supply elasticity that is often estimated empirically and understand its implications for the extent of monopsony power. The shock-identified labor supply elasticity depends on the persistence of the shock, worker risk aversion, and the horizon over which it is estimated. These forces induce a wedge between the inverse shock-identified labor supply elasticity and the wage markdown. We estimate the model using U.S. Census employer-employee matched data. The small and persistent wage response to temporary shocks is consistent with firms insuring risk-averse workers. Search frictions explain why employment continues to rise even after wages have started to fall. We find the average worker's wage is marked down 8.3%. By contrast, the static model approach of inverting the shock-identified labor supply elasticity implies a markdown estimate as wide as 26%. Lastly, we show that firm employment dynamics are not efficient: insurance distorts the job ladder, preventing productivity-improving job transitions from occurring.

• Breadwinning Norms: Experimental Evidence from India (with Kailash Rajah)
  Abstract

  How important are social norms in shaping women’s labor supply relative to neo-classical economic forces? The widely studied "breadwinner norm" holds that it is socially undesirable for married women to earn more than their husbands. We test this prediction using an experiment in India. We randomly vary wage offers for salaried jobs among married women. If the norm binds, labor supply should be discontinuous or flatten when women are offered wages above their husbands' income. We find no evidence that women withdraw from the labor force when offered wages that exceed their husbands’ incomes and can reject negative discontinuities as small as 1.5 percentage points. Instead, labor supply is highly responsive to wages, consistent with standard economic models. These findings hold even in the most conservative households.

Works in Progress

• The Tipped Minimum Wage (with Arthur Wickard)

Publications

• Inversions in US Presidential Elections: 1836–2016 (with Michael Geruso and Dean Spears). American Economic Journal: Applied Economics, vol. 14, January 2022.
  Abstract

  Inversions—in which the popular vote winner loses the election—have occurred in four US presidential races. We show that rather than being statistical flukes, inversions have been ex ante likely since the early 1800s. In elections yielding a popular vote margin within 1 point (one-eighth of presidential elections), about 40 percent will be inversions in expectation. We show this conditional probability is remarkably stable across historical periods—despite differences in which groups voted, which states existed, and which parties participated. Our findings imply that the United States has experienced so few inversions merely because there have been so few elections (and fewer close elections).

CV

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Contact

Email: talesara@mit.edu
Department of Economics, MIT • Cambridge, MA