Elmer Li
Job Market Paper
Optimal Skill Mixing Under Technological Advancements
[paper link] [slides] April 2024
Abstract: Using worker surveys and online job posting data, I document that the U.S. economy has seen a substantial increase in the mixing of skill requirements from 2005-2018, both for incumbent jobs and newly posted vacancies. American workers increasingly work in occupations that demand mixtures of analytical, computer, and interpersonal skills rather than specializing in one of them, even within granular occupations. This change occurred primarily in low- to medium-wage occupations, and workers in occupations that increasingly mix non-routine skills, or those with a broader set of these skills earn a wage premium. To understand the sources of these shifts, I build a multi-dimensional directed search and matching model with two-sided heterogeneity and endogenous choices. In the model, firms optimally choose occupations’ skill intensities before producing with a worker, while workers optimally choose the jobs as well as their life-time skill trajectory. Counterfactual analysis shows that the rise in the complementarity of skills in production and in the cost of skills for occupation operation are the main drivers of skill mixing shifts and the corresponding wage and employment dynamics in this period.
Conference and Seminar Presentations
European Economic Association Annual Congress 2023, ASSA/AEA Annual Meeting 2023, Southern Economics Association (SEA) 2022, Asian and Australasian Society of Labour Economics (AASLE) 2022, Economics Graduate Student Conference (EGSC) at WUSTL 2021, Cornell Labor Work-in-Progress 2021
Other Working Papers
E-commerce and Regional Inequality: A Trade Framework and Evidence from Amazon’s Expansion
[paper link] [slides] April 2024
Abstract: E-commerce exposes consumers to a broader set of goods and retailers, and online retailing by nature is more mobile in space. This paper studies the spatial general equilibrium and redistribution effects of e-commerce on different local labor markets from a trade perspective based on the production technology change in the retail sector. Using a panel of products and retailers on Amazon, I document that online retailers are more agglomerated in space, particularly for those using Amazon’s distribution and fulfillment centers, and their agglomeration is related to higher trade flows of the upstream goods. I then incorporate consumer search and retailer location choices into a multi-sector gravity trade model with an elastic supply of heterogeneous workers. The model implies that the increase in online shopping efficiency, the rise in online retailer agglomeration, and the reduction in shipping friction will induce greater industrial and occupational specialization. Quantitative analysis shows that the growth of Amazon from 2007-2017 had led to overall declines in retail prices, but also worker reallocation out of manufacturing sector, resulting in a 1 percent decrease in welfare. Non-employment increases by 2.3 percentage points and the Gini index on employment across regions increases by near 20 percent, exacerbating regional inequality. Counterfactual experiments allowing government to redistribute regional trade surpluses and intervene in online market design improve spatial efficiency
Conference and Seminar Presentations
Urban Economic Association (UEA) 2023, Eastern Economic Association (EEA) 2023, Conference on Urban and Regional Economics (Philadelphia Fed) 2022, Midwest Macroeconomics 2022, Midwest International Trade 2022, Cornell Macroeconomics Lunch 2022, CIREQ Graduate Student Conference 2022
The Quantity-Quality Tradeoff of Employment and Labor Share Effects of Monetary Policy
[preliminary draft]
Abstract: This paper examines the impact of monetary policies on the labor market and contends that besides the quantity effect of employment, there is a quality effect. I show in a New Keynesian model with directed search and matching between workers and firms, monetary policy alters not only the employment level but the types of jobs created. The model implies that expansionary monetary policies will increase employment, but at the same time, induce a decline in the quality of employment, reflected in workers reallocating to lower-skill sectors and a drop in job quality and labor share. Empirical results support the predictions of the model and show that monetary policies played an important role in the observed employment quality and labor share patterns.
Work in Progress
The Rise of Dollar and Decline of Business Dynamism (with Wentong Chen)
Abstract: We study the role of the US dollar exchange rate in shaping the US domestic business dynamism through trade and multi-national production. In a heterogeneous firm trade model with a variable exchange rate, we show that a relatively strong dollar increases net imports and induces higher-productivity firms to operate overseas. Both forces expand the output gap between high-and-low productivity firms, contribute to the rise in mark-up and market concentration, as well as hinder firm entry and growth rate in the domestic market. We then fit our model to bilateral trade and price data for the last three decades to evaluate the impact of the dollar on domestic firm dynamics. Our results point to the important role of the dollar exchange rate in the decline of business dynamism in the US.
Learning, Inertia and Outcomes of Student School Search (with Jesse Margolis)
[under significant revision]
Abstract: This paper studies the dynamics of student learning and decision-making regarding school choices and their impact on welfare. Utilizing administrative data from New York City schools from 2005 to 2018, we observe that students actively respond to variations in school quality both before and after enrollment. Exploiting the 2007 school report card reform and using a regression discontinuity design, we find evidence of drastic learning and preference changes under the intervention. To better understand these dynamics, we develop a model of directed school search. In the model, students learn and update their beliefs of school quality and their own abilities, leading them to transfer to higher-quality schools. Quantitative analysis reveals two key insights: i) there exists tremendous information friction and search inertia, and ii) this learning-induced transfer increases student welfare in the following years.
Conference and Seminar Presentations
ASSA/AEA Annual Meeting 2018, Association for Public Policy Analysis and Management (APPAM) 2018, Association for Education Finance and Policy (AEFP) 2018, NYC Department of Education 2018