Search Results
Working Paper
The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets
Since the Great Recession, 11 states have restricted employers? access to the credit reports of job applicants. We document that county-level vacancies decline between 9.5 percent and 12.4 percent after states enact these laws. Vacancies decline significantly in affected occupations but remain constant in those that are exempt, and the decline is larger in counties with many subprime residents. Furthermore, subprime borrowers fall behind on more debt payments and reduce credit inquiries postban. The evidence suggests that, counter to their intent, employer credit check bans disrupt labor and ...
Journal Article
Why Haven’t Recent Rate Increases Slowed the Economy More? Look to Unusually Low Private-Lending Spreads
Despite a large and rapid increase in the policy rate since March 2022, economic activity has remained resilient. We argue that private-lending spreads—the difference between the policy rate and rates private-sector borrowers pay—are surprisingly low and a major factor for why rate hikes have not slowed the economy more. If spreads are as insensitive to rate cuts as they are to rate hikes, then they may dampen the effect of expansionary monetary policy.
Journal Article
Lifetime Earnings Differences across Black and White Individuals: Years Worked Matter
In this article, Andrew Glover, José Mustre-del-Río, and Emily Pollard go beyond point-in-time measures of earnings and examine lifetime earnings differences between Black and white individuals. They find that, on average, Black individuals earn about one-third less than white individuals over the course of their lifetimes (a difference equivalent to about $550,000), though the size of this gap varies by sex and education level. In addition, they find that differences in years worked, which are not captured by point-in-time measures, contribute substantially to earnings differences between ...
Working Paper
Negative Nominal Interest Rates Can Worsen Liquidity Traps
Can central banks use negative nominal interest rates to overcome the adverse effects of the zero lower bound? I show that negative rates are likely to be counterproductive in an expectations-driven liquidity trap. In a liquidity trap, firms expect low demand and cut prices, which leads the central bank to reduce nominal rates to their lower bound. If the resulting decline in real rates is not enough to stabilize demand, then the pessimism of price setters is fulfilled. Theoretically, the effect of a negative nominal rate is non-monotonic: a marginally negative rate is not enough to escape ...
Journal Article
Puzzlingly Divergent Trends in Household Wealth and Business Formation
The rate of new business formation has declined sharply in recent decades, raising concerns among economists about job and productivity growth. This observed decline in business formation is likely to be juxtaposed to changes in characteristics such as household wealth that affect households’ propensity to become entrepreneurs. Economic theories of business formation suggest that wealthier households are more likely to start a business because wealth allows them to more easily reach a profitable scale.Justin Barnette and Andrew Glover use data from the Panel Study of Income Dynamics from ...
Report
Intergenerational Redistribution in the Great Recession
We construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of big recessions are distributed across different household age groups. The model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages. Asset price declines hurt the old, who rely on asset sales to finance consumption, but benefit the young, who purchase ...
Journal Article
How Much Have Record Corporate Profits Contributed to Recent Inflation?
Andrew Glover, José Mustre-del-Río, and Alice von Ende-Becker present evidence that markup growth was a major contributor to inflation in 2021. Specifically, markups grew by 3.4 percent over the year, whereas inflation, as measured by the price index for Personal Consumption Expenditures, was 5.8 percent, suggesting that markups could account for more than half of 2021 inflation. However, the timing and cross-industry patterns of markup growth are more consistent with firms raising prices in anticipation of future cost increases, rather than an increase in monopoly power or higher demand.
Working Paper
Uninsurable Income Risk and the Welfare Effects of Reducing Global Imbalances
We highlight the welfare effect of policies that balance global current accounts when households face uninsurable income risk and borrowing constraints. Subsidizing savings in debtor economies reduces current account imbalances and raises the welfare of almost all citizens by increasing world capital, raising wages, and improving insurance for low-wealth households. The same balancing of current accounts is achieved by taxing savings in lender economies; however, this policy hurts most households by reducing global capital. These results suggest that balancing global imbalances may be a ...
Journal Article
What Happens When the Minimum Wage Rises? It Depends on Monetary Policy
Andrew Glover and José Mustre-del-Río examine how monetary policy may amplify or dampen the response of employment and inflation to an increase in the minimum wage. Their model-based analysis suggests a minimum wage increase has expansionary effects on the economy if the central bank is relatively unresponsive to current inflation, and contractionary effects if the central bank responds more aggressively (more than one-for-one) to current inflation. More generally, their framework suggests that if an increase in the minimum wage engenders contractionary effects, the central bank can ...
Report
Health versus Wealth: On the Distributional Effects of Controlling a Pandemic
To slow the spread of COVID-19, many countries are shutting down non-essential sectors of the economy. Older individuals have the most to gain from slowing virus diffusion. Younger workers in sectors that are shuttered have the most to lose. In this paper, we build a model in which economic activity and disease progression are jointly determined. Individuals differ by age (young and retired), by sector (basic and luxury), and by health status. Disease transmission occurs in the workplace, in consumption activities, at home, and in hospitals. We study the optimal economic mitigation policy of ...