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Samuel Young is an Assistant Professor in the Department of Economics at Arizona State University. Young specializes in labor market institutions and has worked on employer opposition to unionization.
TOPIC: "The Distributional Effects of Firm Demand Changes: Evidence from U.S. Linked Worker-Owner Data"
ABSTRACT: This paper analyzes which individuals benefit when firm demand increases and whether the same groups bear the costs of demand decreases. We develop a flexible framework to estimate the incidence of firm shocks with data on each firm’s workers and owners. Specifically, we use linked firm-worker-owner tax data from U.S. pass-through firms to track how each dollar that firms distribute as wages and business profits is allocated among individuals. These data allow us to conduct the first joint analysis of how changes in firm demand affect both workers and owners. We leverage export-demand variation and value-added fluctuations as firm-specific demand shocks. The incidence of these shocks is highly unequal. Individuals in the top 1% of the national income distribution receive up to 60% of the income changes, while those in the bottom 50% receive less than 15%. This unequal distribution arises because firm owners receive most of the income changes from the shocks and are disproportionately in the top of the income distribution. Moreover, the incidence is asymmetric for positive versus negative demand changes. Workers bear 26% of the losses from a negative shock that reduces firm value added by 14% but receive only 10% of the gains from a similarly sized positive shock. This asymmetry arises primarily from the additional costs of job loss for workers following negative demand shocks to the firm.
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