Ararat Gocmen

When an increase in labor supply makes capital more productive, firms respond to immigration by investing—but only if they can finance it. I study how capital-market frictions shape firms’ investment response to immigration and what this implies for their native workers’ wages and employment. In a model in which firms have monopsony power and can borrow to finance investment, firms with larger initial debt burdens face steeper marginal cost schedules when adjusting their capital stocks. Consequently, immigration decreases their capital intensity, wages, and native employment by more. I test these predictions in the context of immigration to Germany during the 2010s, a decade during which a rise in the immigrant share of employment coincided with a fall in firms’ capital intensity. Exploiting variation across commuting zones in the settlement patterns of earlier immigrants, I find that firm leverage is indeed an important moderator of the labor market effects of immigration, matching my model’s predictions.

This paper examines how expanding private capital markets contribute to rising economic inequalities in the U.S. We show that the share of early-stage financing raised from U.S. high-net-worth individuals (HNWIs) tripled from 2004 to 2022. Exploiting the expansion of the qualified small business stock (QSBS) tax exclusion, we find that HNWIs’ investments made startups 5.6% more likely to stay private. Counterfactual simulations reveal that HNWIs’ excess returns on early-stage investments explain 26% of the growth in the top 0.5% wealth share over 2010-2022. Finally, investor entry increased incumbents’ returns and encouraged further investments, generating a self-reinforcing feedback loop between private capital market growth and inequality.