Jaeeun Seo

Job Market Candidate

Research Fields

International Economics, Macroeconomics

Contact Information

Job Market Paper

Sectoral Shocks and Labor Market Dynamics: A Sufficient Statistics Approach (with Ryungha Oh)

In this paper, we develop a sufficient statistics approach to evaluate the impact of sectoral shocks on labor market dynamics and welfare. Within a broad class of dynamic discrete choice models that allows for arbitrary persistent heterogeneity across workers, we show that knowledge of steady-state sectoral worker flows over different time horizons is sufficient to evaluate the labor supply responses to shocks as well as their aggregate welfare consequences. We also establish analytically that assuming away persistent worker heterogeneity, a common practice in the existing literature, necessarily leads to overestimation of steady-state worker flows, resulting in systematic biases in counterfactual predictions. As an illustration of our sufficient statistics approach, we revisit the consequences of the rise of import competition from China. Using US panel data to measure steady-state worker flows, we conclude that labor reallocation away from manufacturing is significantly slower, and the negative welfare effects on manufacturing workers are much more severe than those predicted by earlier models without persistent worker heterogeneity.

Working Papers

What Causes Agglomeration of Services? Theory and Evidence from Seoul (with Ryungha Oh)
July 2023. Awarded Best Student Paper Prize (2022) by the Urban Economics Association

Why are economic activities concentrated in space? What are the policy implications of this concentration? And how do we expect it to change in the future? We revisit these classic questions in the context of non-tradable services, such as restaurants and retail, in Seoul. To understand the concentration of services, we first causally identify positive spillovers across services stores. We microfound these spillovers by incorporating the trip-chaining mechanism—whereby consumers make multiple purchases during their services travel—into a quantitative spatial model that endogenizes the spatial distribution of services. When calibrated to an original survey on trip chaining, this mechanism explains about one-third of the observed concentration. However, unlike standard agglomeration mechanisms, it does not lead to inefficiency nor it exacerbates welfare inequality. Finally, we show that spatial linkages of services consumption play a crucial role in shaping the impact of the rise of work from home and of delivery services on the distribution of services.


Persistent Noise, Feedback, and Endogenous Optimism: A Rational Theory of Overextrapolation
February 2023

I propose a noisy rational expectations model with persistent noise. Firms learn about economic conditions from signals, and the noise in the signals is persistent rather than i.i.d. over time. Firms rationally account for the persistence of noise and update their interpretations of signals based on ex post observations of true economic conditions. I show that this process gives rise to a novel mechanism by which optimism arises endogenously, which in turn amplifies or dampens the effects of underlying shocks. In particular, this model can generate the delayed overreaction in firms' expectations documented in the literature, when firms are better informed about idiosyncratic shocks relative to aggregate shocks. Moreover, strategic complementarity between firms and the resulting higher-order optimism further strengthen my mechanism. Finally, I distinguish empirically my rational theory of optimism from behavioral theories by exploiting the difference in the degree of overextrapolation between consensus and individual forecasts.