Essays in macroeconomics and labor markets

This thesis consists of two independent essays on macroeconomic implications of the organization of labor markets. The first chapter studies optimal fiscal policy in a model with credit frictions and entrepreneurship, where TFP and labor supply are endogenous to taxation and public debt through occupational choice. I characterize how changes in taxation alter incentives for entrepreneurship and how the outside option of own-account work shapes aggregate outcomes. Calibrated to Brazilian data, the model shows that issuing a positive amount of public debt is optimal in steady state. Efficiency gains from moving to the optimal policy are comparable to those from eliminating credit frictions altogether, underscoring the importance of sensible fiscal policy in economies with severe capital misallocation. The second chapter studies how international trade shocks affect firm dynamism and labor misallocation. Using Brazilian administrative data, I document that the aggregate decline in business dynamism conceals substantial heterogeneity across industries, closely mirroring exposure to the China Shock. Using a shift-share strategy, I show that trade exposure causally affects firm entry, exit, local productivity, and labor reallocation. To study aggregate implications, I develop and calibrate a multi-sector model of oligopsonistic labor markets with firm dynamics and demand wedges. Markets hit by negative demand shocks become more concentrated due to firm exit, leading to higher average firm age and lower labor market reallocation, with the reverse holding for positive shocks. Quantitatively, trade shocks account for between one fifth and one fourth of the differences in average firm age observed in Brazil during the 2000s.