Category: Published Research

Comments on Unequal Growth


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Abstract. What is the relationship between income inequality and aggregate growth? Through an ingenious decomposition, Lippi and Perri cast this relationship as a function of simple moments of the distribution of changes in household income. Their study delivers new evidence linking heterogeneous micro-level income changes to macro-level growth outcomes. Faster income growth among rich households has mitigated the slowdown of aggregate growth in the US, especially after 20 0 0. These findings bring forth questions about the origins of unequal growth and its impact on the welfare of different subsets of the population.

Citation

@article{gallipoli2023comments,
  title={Comments on unequal growth},
  author={Gallipoli, Giovanni},
  journal={Journal of Monetary Economics},
  volume={133},
  pages={19--24},
  year={2023},
  publisher={Elsevier}
}

Firm Heterogeneity in Skill Returns


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Abstract. This paper presents new evidence on worker–firm complementarities. We combine matched employer-employee data with direct measures of workers’ cognitive and noncognitive skills, and propose an empirical approach that separately identifies the firm-level return for each attribute. We find that similar skills command different returns across employers and that workers’ sorting into firms depends on returns to both attributes. We derive theoretical restrictions that characterize many-to-one matching in employer-employee data, linking within-firm skill dispersion to between-firm differences in average skills. Estimates support these restrictions. Firm heterogeneity in skill returns raises both the average level and dispersion of earnings.

Citation

@article{bohm2020firm,
  title={Firm Heterogeneity in Skill Returns},
  author={B{\"o}hm, Michael J and Esmkhani, Khalil and Gallipoli, Giovanni},
  journal={Journal of Labor Economics},
  volume={43},
  number={3},
  pages={XXX--XXX},
  year={forthcoming}
}

Permanent-Income Inequality

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Abstract. We examine two alternative welfare representations and empirically characterize their distribution across individuals and households. Through certainty equivalent consumption (CE) measures, we show that dispersion of current earnings, expenditures, and net-worth overstate welfare inequality. This is largely due to the unaccounted value of future earnings, which we call human wealth. The latter mitigates permanent-income inequality, though its influence is diminished by the growing importance of assets in lifetime wealth. Average expenditures and CE inequality roughly doubled between 1983 and 2016 and, to weigh these offsetting forces, we decompose aggregate welfare changes into contributions from the level and dispersion of consumption, as well as uncertainty and demographic composition. About 1/4 of the welfare gains from higher consumption have been lost to rising inequality, with most of the losses accruing after 2000.

Citation

@article{abbott2022permanent,
  title={Permanent-income inequality},
  author={Abbott, Brant and Gallipoli, Giovanni},
  journal={Quantitative Economics},
  volume={13},
  number={3},
  pages={1023--1060},
  year={2022},
  publisher={Wiley Online Library}
}

Sectoral Digital Intensity and GDP Growth After a Large Employment Shock


We develop and estimate a simple state-dependent model of output dynamics. The model builds on the original insights of Okun (1963), generalizing them to multiple sectors and locations. Our simple approach allows for heterogeneity in GDP sensitivity to employment changes. The suggested algorithm can be used to project output across industries and places with minimal data and computational requirements.

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Abstract.

We examine the dynamics of GDP following an economy-wide pandemic shock that curtails physical mobility and the ability to perform certain tasks at work. We examine whether greater reliance on digital technologies has the potential to mediate employment and productivity losses. We employ industry-level indices of task-based digital intensity and ability to work from home (“home-shorability”), in conjunction with publicly available data on employment and GDP for Canada, and document that: (i) employment responses after the onset of the shock are milder in digitally-intensive sectors; (ii) conditional on the size of employment
changes, GDP responses are less extreme in IT-intensive sectors. We suggest a simple state-dependent algorithm for predicting output dynamics as a function of employment across industries and locations with different digital intensities. In our baseline scenario, the aggregate output returns to pre-crisis levels eight quarters after the initial shock onset, although we find significant heterogeneity in recovery patterns across sectors.

Citation

@article{gallipoli2022sectoral,
  title={Sectoral digital intensity and GDP growth after a large employment shock: A simple extrapolation exercise},
  author={Gallipoli, Giovanni and Makridis, Christos A},
  journal={Canadian Journal of Economics/Revue canadienne d'{\'e}conomique},
  volume={55},
  pages={446--479},
  year={2022},
  publisher={Wiley Online Library}
}

Match Quality and Contractual Sorting


We ask whether match-specific quality has an effect on the type of contractual arrangements that firms offer to workers. We present evidence that contractual arrangements depend on match quality and that heterogeneity in pay mechanisms has a significant effect on employment durations and wage dynamics.
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Abstract. This paper examines the impact of match-specific heterogeneity on compensation arrangements. In a stylized contractual choice problem, we show that employers may have an incentive to offer performance-based contracts when match-specific productivity is high. We test the empirical content of this hypothesis using the NLSY79, which contains information about individual job histories and performance pay. We find that better match quality does affect pay arrangements, employment durations, and wage cyclicality. Direct evidence on the accrual of job offers to workers lends support to the hypothesis that employers use performance-related compensation to preserve high-quality matches.

Citation

@article{fgy2020contracts,
  title={Match Quality and Contractual Sorting},
  author={Galindo da Fonseca, Joao and Gallipoli, Giovanni and Yedid-Levi, Yaniv},
  volume={66},
  year={2020},
  journal={Labour Economics}
}

Human Capital Inequality: Empirical Evidence


Heterogeneity in human capital is a key source of differences in economic well-being. This article provides a synopsis of the empirical approaches that have characterized the analysis of human capital inequality over the past few decades.
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Abstract. Wealth inequality has received considerable attention, with mounting evidence of steady and economically meaningful changes in the concentration of wealth ownership. By definition, wealth inequality captures disparity in the ownership of productive capital and other non-labor factors of production. In contrast, in this article we focus on the distribution of human capital and its implications for the accrual of economic resources to individuals and households. Human capital inequality can be thought of as measuring disparity in the ownership of labor factors of production, which are usually compensated in the form of wage income.

Citation

@article{AG_HC2019,
  title={Human Capital Inequality: Empirical Evidence},
  author={Abbott, Brant and Gallipoli, Giovanni},
  journal={Oxford Research Encyclopedia of Economics and Finance},
  year={2020},
  month={January}
}

Education Policy and Intergenerational Transfers in Equilibrium


We examine the equilibrium effects of alternative financial aid policies intended to promote college participation. We model a rich environment featuring various dimensions of heterogeneity and intergenerational linkages.
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Abstract. This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life cycle model with education, labor supply, and consumption/saving decisions. Cognitive and non-cognitive skills of children depend on the cognitive skills and education of parents and affect education choice and labor market outcomes. Driven by both altruism and paternalism, parents make transfers to their children which can be used to fund education, supplementing grants, loans, and the labor supply of the children themselves during college. The crowding out of parental transfers by government programs is sizable and thus cannot be ignored when designing policy. The current system of federal aid is valuable: removing either grants or loans would each reduce output by 2% and welfare by 3% in the long-run. An expansion of aid towards ability-tested grants would be markedly superior to either an expansion of student loans or a labor tax cut. This result is, in part, due to the complementarity between parental education and ability in the production of skills of future generations.

Citation

@article{AGMV2019,
 title={Education Policy and Intergenerational Transfers in Equilibrium},
 author={Abbott, Brant and Gallipoli, Giovanni and Meghir, Costas and Violante, Giovanni Luca},
 journal={Journal of Political Economy}, 
volume = {126},
number = {6},
pages = {2569-2624},
year={2019}
}

Markov-Chain Approximations for Life-Cycle Models


Non-stationary income processes are standard in quantitative life-cycle models. Their approximation is key for numerical implementations. We develop methods to apply standard discretization algorithms within non-stationary life-cycle settings and assess their relative performance. In one extension we examine income processes in which shocks to earnings are modeled as draws from a mixture of Normal distributions and describe simple and tractable approaches to numerically describe non-Normal earnings distributions.

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Abstract. Non-stationary income processes are standard in quantitative life-cycle models, prompted by the observation that within-cohort income inequality increases with age. This paper generalizes Tauchen (1986), Adda and Cooper (2003), and Rouwenhorst’s (1995) discretization methods to non-stationary AR(1) processes. We evaluate the performance of these methods in the context of a canonical life-cycle,income-fluctuation problem with a non-stationary income process. We also examine the case in which innovations to the persistent component of earnings are modeled as draws from a mixture of Normal distributions. We find that the generalized Rouwenhorst’s method performs consistently better than the others even with a relatively small number of states.

Citation

@article{fgp2019approximations,
  title={Markov-Chain Approximations for Life-Cycle Models},
  author={Fella, Giulio and Gallipoli, Giovanni and Pan, Jutong},
  journal={Review of Economic Dynamics},
  year={2019},
  volume = {34},
  pages = {183-201}
}

Structural Transformation and the Rise of Information Technology


We use a task-based IT intensity index to: (1) document the evolution of earnings, employment, and productivity in low and high tech industries; (2) estimate the elasticity of substitution in production between IT and non-IT jobs; (3) revisit Solow’s Paradox, finding evidence of positive occupation-level effects of IT intensity on productivity growth.

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Abstract. Has the emergence of information technology changed the structure of employment and earnings in the US? We propose a new index of occupation-level IT intensity and document several long-term changes in the occupational landscape over the past decades. Using Census and US KLEMS micro-data, we show that: (i) the bulk of productivity growth after 1950 is concentrated in IT-intensive sectors; (ii) the share of workers in IT jobs has expanded significantly, with little or no pause and IT jobs enjoy a large and growing earnings premium, even after controlling for general task requirements (e.g., cognitive, non-routine); and (iii) the rise of the IT-intensive employment share is closely associated with declines in the manufacturing employment share. While earnings premia for college-educated and cognitive/non-routine workers have flattened in the aggregate since 2000, we show that they continued growing in IT-intensive jobs and that these jobs have played a key role in accounting for the surge of high tech service labor productivity. We also use our IT intensity index to estimate industry-specific elasticities of substitution between IT and non-IT intensive labor, finding values of 1.6 in manufacturing and 1.3 in services. Finally, we revisit a long-standing question about the relationship between technological progress and productivity and provide evidence that occupation-level IT intensity is positively associated with output growth, especially in the services sector.

Citation

@article{gallipoli_makridis_2018_structural_transformation,
 title={Structural Transformation and the Rise of Information Technology},
 author={Gallipoli, Giovanni and Makridis, Christos A.},
 journal={Journal of Monetary Economics},
 year={2018},
 month={August},
 note = {Carnegie Rochester NYU Series on Public Policy}
}

The Costs of Occupational Mobility: An Aggregate Analysis


We define a measure of job distance based on task content and quantify its importance for occupational mobility. We estimate the size of different layers of mobility costs.

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Abstract. We estimate the costs of occupational mobility and quantify the relative importance of differences in task content as a component of total mobility costs. We use a novel approach based on a model of occupational choice which delivers a gravity equation linking worker flows to occupation characteristics and transition costs. Using data from the Current Population Survey and the Dictionary of Occupational Titles we find that task-specific costs account for no more than 15% of the total transition cost across most occupation pairs. Transition costs vary widely across occupations and, while increasing with the dissimilarity in the mix of tasks performed, are mostly accounted for by task-independent occupation-specific factors. The fraction of transition costs that can be attributed to task-related variables appears fairly stable over the 1994-2013 period.

Citation

@article{cortes_gallipoli2018costs,
  title={The Costs of Occupational Mobility: an Aggregate Analysis},
  author={Cortes, Guido Matias and Giovanni Gallipoli},
  journal={Journal of the European Economic Association},
  volume={16},
  pages = {275-315},
  number = {2},
  year={2018}
}