Publications
Pandemic Containment and Inequality in a Developing Economy (with Kunal Dasgupta)
Economic Inquiry, 2024, 62(2), pages 837-864. [Working Paper]
Using high frequency individual-level panel data from India, we show that income inequality, measured as the ratio of high-skilled to low-skilled income, increased sharply following the imposition of lockdown triggered by COVID-19. To explain this fact, we integrate a canonical SIRD epidemiological model into a general equilibrium framework with high-skilled and low-skilled workers, each choosing to work either from their work locations (onsite) or from their homes (remote). Onsite and remote labour are imperfect substitutes, but more substitutable for high-skilled relative to low-skilled workers. Upon introducing the containment policies calibrated to match the Indian experience, our model can explain between 24 and 60 percent of the observed increase in inequality. We also find that there is a higher incidence of infections among the low-skilled workers as they optimally choose to work more onsite compared to their high-skilled counterparts. Implementing direct transfers for low-skilled workers reverses this increase in inequality and improves the effectiveness of the containment policies.
Labour Search with Endogenous Outside Option (with Ritesh Jain)
Economics Bulletin, 2022, 42(2), pages 1092-1102. [Working Paper]
We incorporate the extended version of Nash bargaining proposed by Vartiainen (2007) in a standard labour search and matching model to endogenously determine the outside option of workers along with their wages. We find that the optimal outside option of a worker under this framework is zero and this equilibrium maximizes social welfare when the economy is constrained efficient.
Working Papers
Gender Gap and Decline in Female Labour Force Participation in India: A Joint Search Perspective (with Monisankar Bishnu and S Chandrasekhar)
India, on top of having a large gender gap in labour force participation, also experienced a significant decline in participation rate of women in the recent years. In order to understand, and to decompose the gender gap and the decline in female labour force participation into demand and supply side factors, we present an equilibrium joint search model of couples with gender-specific wage offers and home productivities. In this heterogeneous agents setup, our counterfactual exercises show that, gender disparities in labour demand can account for only 6.4% of the level difference, while the differential trends in labour demand can explain around 35% of the decline in female participation over time. We find that the increase in average household income driven by a large increase in male wages compared to female wages, reduced the need for women to supplement the family income, in turn causing them to drop out of the labour force.
Effect of Social Information on Competition Choice (with Ritwik Banerjee, Lata Gangadharan, Anand Kumar)
We show that social information about competition choices influences individuals’ willingness to compete. In a laboratory experiment, participants perform a real-effort task under piece-rate and tournament incentives, and subsequently participate in two choice rounds. We vary the information provided between the two choice rounds across three treatments. We find that social information on the proportion of participants that choose to compete in the first round affects the willingness to compete in the second round. Salience of payment schemes does not explain this result. Observing a lower willingness to compete by others increases the likelihood of one’s own willingness to compete. This suggests that participants strategically choose to compete based on their treatment induced belief about the average ability of other participants, and this is consistent with predictions from a rational model of Bayesian learning. This effect is particularly strong for women.
Wage Cyclicality Across Time and Frequencies (with Shweta Sogani)
This paper documents how the cyclicality of real wages has evolved over time and across different frequencies in the US. We use individual level data from the CPS to construct composition bias corrected wage series at a quarterly frequency. Utilizing continuous wavelet tools, we find that the cyclicality of wages for all the workers as well as new hires has increased over time, and this increase is prevalent across all the frequencies. Further, the increase in cyclicality is primarily concentrated among the workers with less than college education. This decline in wage rigidity over the business cycle relates to broader structural changes in the labour market and has implications for labour search framework.
Job Specialization and Labor Market Turnover
R&R Review of Economic Dynamics
This paper studies the decline in labor market turnover over recent decades, in particular, the job finding and separation rates. I analyze the role of an increase in specialization of jobs in accounting for this decline, where specialization is defined as the impact of mismatch on match productivity. Combining individual level data from NLSY79 and NLSY97 with data on skills from ASVAB and O*NET, I empirically estimate job specialization and show that the specialization has increased over time. To quantify the impact of this increasing specialization on labor market turnover, I build an equilibrium search and matching model with two-sided ex-ante heterogeneity and endogenous separations. The calibrated model shows that higher job specialization leads to a decline in both job finding and separation rates. As specialization increases, firms and workers become more selective in forming matches. Thus, well-matched firms and workers choose to remain in their matches longer, while bad matches get destroyed faster. Since higher specialization leads to an increase in the proportion of good matches in the economy, it results in a decline in the labor market turnover.
Asymmetric Business Cycles in Segmented Labour Markets (with Abhishek Naresh, Jong Kook Shin, Chetan Subramanian)
We document the presence of asymmetric wage and employment dynamics in both regular and contract labour markets in India, investigate the role of nominal wage rigidities in accounting for these asymmetries, and study optimal inflation policy in such a milieu. Using data from Annual Survey of Industries, we find that (i) the growth of regular employment is negatively skewed while that of contract employment is positively skewed, and (ii) the nominal wage growth of regular workers is positively skewed while that of contract workers is negatively skewed. To understand the policy implication of asymmetric labour adjustment, we first show that a workhorse business cycle model needs to be augmented with asymmetric wage adjustment costs for both regular and contract labour to match the observed asymmetries in employment. Our model further suggests that the presence of contract labour reduces the optimal level of grease inflation required in the economy as it relaxes the constraint of downward nominal wage rigidity.
Other Writings
Need focus on removing obstacles to 'good' jobs (with Kunal Dasgupta and Vidhya Soundararajan)
Hindustan Times, January 21, 2021
India's Labour Market Databases (with Monisankar Bishnu and S Chandrasekhar)
Moneycontrol, October 10, 2022
Housing and Labour Markets (with Prakshi Goyal and Durga Shirsat)
Forbes India, January 9, 2023
Older Working Papers
A Stochastic Simulation based Algorithm for Solving Dynamic Economic Models
Pandemic Containment and Inequality in a Developing Economy (with Kunal Dasgupta)
Economic Inquiry, 2024, 62(2), pages 837-864. [Working Paper]
Using high frequency individual-level panel data from India, we show that income inequality, measured as the ratio of high-skilled to low-skilled income, increased sharply following the imposition of lockdown triggered by COVID-19. To explain this fact, we integrate a canonical SIRD epidemiological model into a general equilibrium framework with high-skilled and low-skilled workers, each choosing to work either from their work locations (onsite) or from their homes (remote). Onsite and remote labour are imperfect substitutes, but more substitutable for high-skilled relative to low-skilled workers. Upon introducing the containment policies calibrated to match the Indian experience, our model can explain between 24 and 60 percent of the observed increase in inequality. We also find that there is a higher incidence of infections among the low-skilled workers as they optimally choose to work more onsite compared to their high-skilled counterparts. Implementing direct transfers for low-skilled workers reverses this increase in inequality and improves the effectiveness of the containment policies.
Labour Search with Endogenous Outside Option (with Ritesh Jain)
Economics Bulletin, 2022, 42(2), pages 1092-1102. [Working Paper]
We incorporate the extended version of Nash bargaining proposed by Vartiainen (2007) in a standard labour search and matching model to endogenously determine the outside option of workers along with their wages. We find that the optimal outside option of a worker under this framework is zero and this equilibrium maximizes social welfare when the economy is constrained efficient.
Working Papers
Gender Gap and Decline in Female Labour Force Participation in India: A Joint Search Perspective (with Monisankar Bishnu and S Chandrasekhar)
India, on top of having a large gender gap in labour force participation, also experienced a significant decline in participation rate of women in the recent years. In order to understand, and to decompose the gender gap and the decline in female labour force participation into demand and supply side factors, we present an equilibrium joint search model of couples with gender-specific wage offers and home productivities. In this heterogeneous agents setup, our counterfactual exercises show that, gender disparities in labour demand can account for only 6.4% of the level difference, while the differential trends in labour demand can explain around 35% of the decline in female participation over time. We find that the increase in average household income driven by a large increase in male wages compared to female wages, reduced the need for women to supplement the family income, in turn causing them to drop out of the labour force.
Effect of Social Information on Competition Choice (with Ritwik Banerjee, Lata Gangadharan, Anand Kumar)
We show that social information about competition choices influences individuals’ willingness to compete. In a laboratory experiment, participants perform a real-effort task under piece-rate and tournament incentives, and subsequently participate in two choice rounds. We vary the information provided between the two choice rounds across three treatments. We find that social information on the proportion of participants that choose to compete in the first round affects the willingness to compete in the second round. Salience of payment schemes does not explain this result. Observing a lower willingness to compete by others increases the likelihood of one’s own willingness to compete. This suggests that participants strategically choose to compete based on their treatment induced belief about the average ability of other participants, and this is consistent with predictions from a rational model of Bayesian learning. This effect is particularly strong for women.
Wage Cyclicality Across Time and Frequencies (with Shweta Sogani)
This paper documents how the cyclicality of real wages has evolved over time and across different frequencies in the US. We use individual level data from the CPS to construct composition bias corrected wage series at a quarterly frequency. Utilizing continuous wavelet tools, we find that the cyclicality of wages for all the workers as well as new hires has increased over time, and this increase is prevalent across all the frequencies. Further, the increase in cyclicality is primarily concentrated among the workers with less than college education. This decline in wage rigidity over the business cycle relates to broader structural changes in the labour market and has implications for labour search framework.
Job Specialization and Labor Market Turnover
R&R Review of Economic Dynamics
This paper studies the decline in labor market turnover over recent decades, in particular, the job finding and separation rates. I analyze the role of an increase in specialization of jobs in accounting for this decline, where specialization is defined as the impact of mismatch on match productivity. Combining individual level data from NLSY79 and NLSY97 with data on skills from ASVAB and O*NET, I empirically estimate job specialization and show that the specialization has increased over time. To quantify the impact of this increasing specialization on labor market turnover, I build an equilibrium search and matching model with two-sided ex-ante heterogeneity and endogenous separations. The calibrated model shows that higher job specialization leads to a decline in both job finding and separation rates. As specialization increases, firms and workers become more selective in forming matches. Thus, well-matched firms and workers choose to remain in their matches longer, while bad matches get destroyed faster. Since higher specialization leads to an increase in the proportion of good matches in the economy, it results in a decline in the labor market turnover.
Asymmetric Business Cycles in Segmented Labour Markets (with Abhishek Naresh, Jong Kook Shin, Chetan Subramanian)
We document the presence of asymmetric wage and employment dynamics in both regular and contract labour markets in India, investigate the role of nominal wage rigidities in accounting for these asymmetries, and study optimal inflation policy in such a milieu. Using data from Annual Survey of Industries, we find that (i) the growth of regular employment is negatively skewed while that of contract employment is positively skewed, and (ii) the nominal wage growth of regular workers is positively skewed while that of contract workers is negatively skewed. To understand the policy implication of asymmetric labour adjustment, we first show that a workhorse business cycle model needs to be augmented with asymmetric wage adjustment costs for both regular and contract labour to match the observed asymmetries in employment. Our model further suggests that the presence of contract labour reduces the optimal level of grease inflation required in the economy as it relaxes the constraint of downward nominal wage rigidity.
Other Writings
Need focus on removing obstacles to 'good' jobs (with Kunal Dasgupta and Vidhya Soundararajan)
Hindustan Times, January 21, 2021
India's Labour Market Databases (with Monisankar Bishnu and S Chandrasekhar)
Moneycontrol, October 10, 2022
Housing and Labour Markets (with Prakshi Goyal and Durga Shirsat)
Forbes India, January 9, 2023
Older Working Papers
A Stochastic Simulation based Algorithm for Solving Dynamic Economic Models