CLE Seminar: Andrea Colciago

Seminar Series

Friday, 18 October 2024, 12 p.m.

Room G.141

Andrea COLCIAGO, Università di Milano Bicocca.

“Monetary Policy, employment concentration, and unemployment”

(Co-authored with Guido Ascari and Marco Membretti)

Abstract:  Using a mixed-frequency BVAR applied to U.S. data, we find that a monetary tightening reduces firm entry, raises unemployment, and leads to a sustained increase in employment concentration within large firms. Our analysis reveals that job creation by new entrants is more negatively affected than that by incumbents. To explain these findings, we propose and estimate a model that integrates the theory of the firm boundaries, with diminishing marginal returns, into a framework featuring search frictions in the labor market and nominal price rigidities. A key factor in explaining shifts in employment concentration following monetary policy shocks is that small firms exit at much higher rates than large firms.