Empirical Essays on Firm Operations and Labor Economics

Abstract

This dissertation includes three papers that study firm operations and labor market adjustment using an empirical focus. The first chapter investigates the effect of workplace safety regulation on manufacturing operations. It matches a sample of random worksite inspections by OSHA to annual manufacturing data from the US Census Bureau and then estimates how these inspections affected establishment operations using a local projections approach to difference-in-differences. The results show that increased regulatory enforcement and safety compliance primarily affected establishment size rather than productivity or capital-intensity. Employment growth among inspected establishments was 15.6 percentage points lower over a decade, while productivity growth fell by 1.9 percentage points and the capital-labor ratio grew by 4.2 percentage points more before reverting to non-inspection levels. Over a five-year horizon, the direct cost of OSHA's random inspection program is estimated to be between $5.5 and $39.5 billion of manufacturing output in 2018 dollars. The same event study methodology is then applied to workplace incidents that triggered OSHA inspections. Workplace accidents or reports of unsafe conditions were followed by even larger declines in employment growth and more persistent changes to productivity and factor allocations. Complaints about unsafe working conditions preceded particularly large cuts to average worker compensation.

The second chapter, co-authored with Wenting Song, provides empirical evidence of the importance of firm attention to macroeconomic dynamics. We construct a text-based measure of attention to macroeconomic news and document that attention is polarized across firms and countercyclical. Differences in attention lead to asymmetric responses to monetary policy: expansionary monetary shocks raise market values of attentive firms more than those of inattentive firms, and contractionary shocks lower values of attentive firms by less. Attention also mitigates the effects of macroeconomic uncertainty on firm performance. In a quantitative rational inattention model that is calibrated with this new text-based measure, inattention drives monetary non-neutrality. As average attention varies over the business cycle, so does the efficacy of monetary policy.

The third chapter estimates the effect of access to higher education on local employment recoveries following the Great Recession. It begins by describing the historical magnitude and composition of countercyclical enrollment between 1987 and 2019 to motivate the potential importance of higher education as a means of labor market adjustment. The chapter then presents an empirical strategy for estimating the effect of new enrollment during the Great Recession on local employment rates in subsequent years. The strategy uses a scaled Bartik instrument to isolate enrollment that is plausibly exogenous to local labor demand shocks and conditions on local educational attainment. The main results show that a one percentage point increase in the enrollment rate between 2007 and 2010 is associated with a 2.0 percentage point larger increase in the employment rate between 2007 and 2018. The effect is strongest among adults ages 25-34 and is largely consistent with the timing and age composition of new enrollment during the Great Recession.