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Abstract: The United States has experienced a significant decline in firm entry rates and entrepreneurship since the 1980s. I document that this decline is more pronounced among married households and men, coinciding with changes in demographic composition (including the share of married households, skilled individuals, and marital sorting) and the rise in female labor force participation. To explore the relationship between demographic shifts and entrepreneurship, I develop a model of occupational choice that incorporates marital status, education, and gender. My findings suggest that changes in demographic composition account for 76% of the decline in entrepreneurship in the U.S.
Abstract: Since the 1980s, the U.S. has undergone a marked shift in business organization: the output share of pass-through entities (S-corporations, LLCs, partnerships, and sole proprietorships) has nearly doubled, while the share of C-corporations has declined. A natural candidate explanation for this reallocation is changes in tax policy. Indeed, tax policy, opportunities for tax avoidance, and the borrowing capacity of private businesses have all changed substantially over this period. To quantify the contribution of these factors to the observed reallocation of output, we develop a dynamic model of entrepreneurship featuring borrowing constraints, taxation with endogenous tax avoidance, and overhead costs. We find that changes in taxation, borrowing capacity, and tax avoidance play only a secondary role, together accounting for less than 20% of the observed reallocation. However, when we consider changes in overhead costs for pass-through entities consistent with the evidence, the model can account for up to two-thirds of the observed reallocation. Our results suggest that additional mechanisms are needed to fully account for the patterns in the data.
Abstract: This paper examines how executive compensation influences firm investment, intangible capital, and innovation by exploiting the elimination of performance-based pay deductibility under the 2017 U.S. Tax Cuts and Jobs Act. Using difference-in-differences and event-study designs, we show that firms more exposed to the shock significantly reduce R&D, intangible capital, capital expenditures, and patent applications, especially among growth-oriented and smaller firms. We trace these real effects to weaker incentives: high-exposure firms cut stock-based and non-equity incentive pay and experience declines in risk-taking incentives, and they shift toward safer financial policies with higher payouts, lower cash flow, and higher earnings per share.
"Part-time Penalties, Household Decisions, and the Gender Pay Gap" (draft available upon request.)
joint with Terry Cheung and Siyu Shi
Abstract: We study how joint household decisions shape gender gaps in hours and wages. Using U.S. data from the American Community Survey and the American Time Use Survey, we document that gender gaps vary with both spouses’ occupation types, hourly wages are nonlinear in hours, and increases in non-market time associated with family size operate primarily through childcare and reductions in female market hours. To interpret these facts, we develop a static household model in which couples jointly choose market hours, childcare time, and expenditures under occupation-specific nonlinear earnings schedules and progressive taxation. In counterfactual experiments, margins that change the returns to hours worked, such as child-related labor-income penalties, nonlinear earnings schedules, and the secondary-earner tax wedge, generate large increases in mothers’ labor supply and reduce the aggregate gender gap from about 0.31 log points to between 0.21 and 0.09, whereas subsidizing monetary child investment substantially increases child spending but leaves the aggregate gender gap essentially unchanged.
Work in Progress
"Entrepreneurship, Inequality, and Redistribution" joint with Hakki Yazici
"Firm Types and Financial Structures" joint with Okan Akarsu and Emrehan Aktug.
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