This paper develops a neoclassical theory of firm spatial sorting in which more productive firms locate in larger cities even in the absence of agglomeration externalities or market frictions. The core mechanism operates through relative factor prices: when labor and intermediate inputs are complements and productivity is labor-augmenting, spatial variation in wages gives rise to a unique pure-sorting equilibrium with spatial positive assortative matching. The resulting market equilibrium is efficient. The framework is then extended to incorporate agglomeration externalities and to characterize optimal place-based policy, showing that pecuniary sorting dampens optimal subsidies and introduces a progressive force. Using Chinese firm-level tax data, key technology parameters are estimated and shown to lie in the region consistent with the model’s sorting predictions. Quantitatively, relative price mechanism alone account for approximately 40% of observed firm spatial sorting in the data.

This paper examines the consumer welfare impacts of increasing access to EV charging infrastructure. We develop a model of EV route choice and optimal charging locations and estimate it with rich data from Connecticut on vehicle registrations, road segments, cell phone tracks, and charging station locations and characteristics. At the core of the analysis is a model of EV driver decisions about where to travel and when to charge, and we complement this with a model of vehicle demand that shows how improved charging infrastructure can increase EV market share. We use the model to explore a “proof of concept” counterfactual that optimally adds Level 3 (L3) charging stations in the set of nodes in Connecticut. A key result is that there are consumer welfare gains possible from optimally increasing the number of L3 charging stations in Connecticut but that the gains primarily accrue to existing EV drivers.

Combining industry-level data on output and prices with novel monetary policy shock estimates for 102 countries, we analyze how the effects of monetary policy vary with industry characteristics. Next to being interesting in their own right, our findings are informative on the importance of various transmission mechanisms, as they are thought to vary systematically with the included characteristics. Results suggest that monetary policy has greater output effects in industries featuring assets that are more difficult to collateralize or consisting of smaller firms, consistent with the credit channel, followed by industries producing durables, as predicted by the interest rate channel. The credit channel is stronger during bad times as well as in countries with lower levels of financial development, in line with financial accelerator logic. We do not find support for the cost channel of monetary policy, and only limited support for a channel running via exports. Our database (containing monetary policy shock estimates for 176 countries) may be of independent interest to researchers.

The real option value theory posits that non-convex adjustment costs pertaining to a firm's input are central to comprehending the consequences of increased uncertainty. This paper leverages the diversity observed at both sectoral and country levels in the degree of irreversibility associated with hiring and firing, a critical factor generating what is commonly referred to as “wait-and-see” behavior in times of heightened uncertainty. Our empirical findings reveal two key insights. First, in alignment with the concept of second-moment shocks, uncertainty shocks predominantly influence the labor market through the extensive margin rather than the intensive margin. Second, the effects of uncertainty shocks exhibit pronounced heterogeneity across countries and industries, and the adverse employment effects (extensive margin) are amplified in a country with strict employment protection or in an industry characterized by a higher natural layoff rate, consistent with the real option theory.

What is the source of job polarization in Korea? In this paper, we empirically examine if two competing hypotheses, a path-dependency hypothesis and an ageing hypothesis, can explain patterns of job polarization in Korea. By exploiting regional variations, we find that between 2008 and 2019, job polarization was more evident in regions in which routine workers were historically more important than non-routine workers (path-dependency) while ageing is not associated with the structural change in the labour market. We further show that job polarization is mainly driven by female workers.

Are government spending shocks inflationary at the zero lower bound (ZLB)? Despite the importance of the inflation channel in amplifying government spending multipliers at the ZLB, empirical studies have not provided a clear answer to this question. Exploiting newly constructed high-frequency data on government spending and the price index of the U.S. economy, we find that prices decline in response to a positive government spending shock at the ZLB. Government spending shocks are also more deflationary at the ZLB than during normal times. While our finding is difficult to reconcile with standard New Keynesian models, which predict a larger fiscal multiplier following fiscal expansion at the ZLB—driven by rising inflation and a falling real interest rate—a model with credit constraints can explain this anomaly.