Martin Souchier

I am an Assistant Professor of Finance at the Wharton School of the University of Pennsylvania.

My research focuses on Macroeconomics, especially on labor markets and monetary economics.

Research

Insurance Inside and Outside the Firm

This paper presents a new model with optimal wage contracts, assets, and search frictions in general equilibrium. Contracts are subject to hidden search and limited commitment on the side of workers and firms, and workers can trade risk-free bonds subject to borrowing constraints. Firms take advantage of workers' access to financial markets when they design how wages change with tenure and after productivity shocks. The optimal contract features tenure profiles for wages and worker mobility across jobs that are consistent with evidence from matched employer-employee data from France and is also consistent with evidence of limited pass-through of productivity shocks to wages and on marginal propensity to consume. Relative to a model without assets, the pass-through of firm-level productivity shocks to wages is three times larger but the pass-through to consumption is two times smaller.  Thus, when workers have access to insurance outside the firm, workers receive less insurance from firms against productivity shocks but more insurance overall.

The Pass-through of Productivity Shocks to Wages and the Cyclical Competition for Workers

Using French matched employer-employee data, I document that after positive firm-level productivity shocks, the wages of stayers rise and job-to-job transitions fall. However, after positive sectoral productivity shocks, wages rise significantly more and job-to-job transitions rise. To explain these differences, I build a model with dynamic wage contracts subject to two-sided limited commitment and imperfect information and in which sectoral productivity shocks generate cyclical competition for workers. After a positive firm-level shock, a firm increases its wages to reduce the quit rate of its workers. This increase is limited because workers are risk-averse and value insurance against shocks and because there is no increase in the cyclical competition from other firms. In contrast, after positive sectoral shocks, the cyclical competition for workers heats up and workers become more likely to switch jobs. In response, all firms increase their wages more aggressively to retain them. I find that firing costs play a new role when contracts are endogenous: by enhancing the commitment power of firms, they allow workers to receive more insurance against negative shocks.

Exchange Rates and Monetary Policy with Heterogeneous Agents: Sizing up the Real Income Channel, with Adrien Auclert, Matthew Rognlie and Ludwig Straub

Under revision for the American Economic Review

Introducing heterogeneous households to a New Keynesian small open economy model amplifies the real income channel of exchange rates: the rise in import prices from a depreciation lowers households’ real incomes, and leads them to cut back on spending. When the sum of import and export elasticities is one, this channel is offset by a larger Keynesian multiplier, heterogeneity is irrelevant, and expenditure switching drives the output response. With plausibly lower short-term elasticities, however, the real income channel dominates, and depreciation can be contractionary for output. This weakens monetary transmission and creates a dilemma for policymakers facing capital outflows. Delayed import price pass-through weakens the real income channel, while heterogeneous consumption baskets can strengthen it.

Publications

Environmentally Adjusted Multifactor Productivity: Methodology and Empirical Results for OECD and G20 Countries, with Miguel Cárdenas Rodríguez and Ivan Haščič, Ecological Economics, 153, 2018

Environmental Policy Design, Innovation and Efficiency Gains in Electricity Generation with Nick Johnstone, Shunsuke Managi, Miguel Cárdenas Rodríguez, Ivan Haščič and Hidemichi Fujii, Energy Economics, 63, 2017

Réglementation, normalisation : leviers de la compétitivité industrielle with Emilie Bourdu Szwedek, Presses des Mines, 2015