Work in Progress

Product Market Dynamics over the Business Cycle

This paper examines the interaction between product entry/exit and consumer demand over the business cycle. I develop a model of product market dynamics featuring endogenous choices of producers and consumers within a unified framework. Utilizing micro-level scanner data, the study estimates the model to capture the responses of producers and consumers during the Great Recession. The findings reveal that producers react to negative demand shocks by reducing entries and increasing exits, with these responses varying according to the underlying consumer demand structure. These heterogeneous reactions intensify welfare losses and amplify the adverse effects of the business cycle, particularly for low-quality products. By exploring the diverse characteristics of products and their impacts, this research highlights the significant role of endogenous choices in shaping aggregate economic outcomes.

Publications

Minimum Wage, Employment, and Margins of Adjustment: Evidence from Employer-Employee Matched Panel Data

with Jungmin Lee, Accepted, Journal of Human Resources

We decompose the employment effect of the minimum wage into changes in employment within continued establishments and changes due to the exits of establishments. For small-sized establishments, we distinguish between other labor adjustment margins, such as hours worked, hiring, and separation at the individual level. Using employer–employee matched panel data, we show that the magnitude and channels of the employment effect differ by establishment size and industry. We find a negative effect of the minimum wage on employment growth, which is highly concentrated among small establishments. In particular, in the food and lodging and manufacturing industries, a substantial part of the effect is driven by business closing.