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question using a novel framework of firm labor choice in the face of aggregate risk. The theory implies a cross-section of …-level facts. We use cross-country firm-level data to document a number of empirical patterns consistent with the theory, namely …
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We develop a macroeconomic framework in which firms are large and have market power with respect to both products and labor. Each firm maximizes a share-weighted average of shareholder utilities, which makes the equilibrium independent of price normalization. In a one-sector economy, if returns...
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