Andrei Shevchenko

Outsourcing peter to pay paul: High-skill expectations and low-skill wages with imperfect labor markets

In this paper, we investigate the impact of globalization on wages earned by low- and high-skill workers when openness leads to the outsourcing of high-tech jobs abroad. We have shown that low-skill workers may become considerably better off after globalization because high-skill workers start accepting low-tech jobs. The switch in the behavior of high-skill workers brings about general equilibrium responses from the firm side of the labor market with the outside options for low-skill workers improving significantly. This feedback works as a magnification mechanism that leads to a discontinuous wage increase that one would not be able to get without careful modeling of the frictions in the labor market.

Intensive vs Extensive Margin Tradeoffs in a Simple Monetary Search Model

We introduce ex-post heterogeneity into monetary search models with lotteries. Heterogeneity allows lotteries over goods to exist in equilibrium. These lotteries over goods create an intensive margin (expected production in a match) that is non-existent in all indivisible goods monetary search models. We then show there can be a tradeoff between the intensive margin and extensive margin (number of matches) when choosing the optimal monetary stock.