Search Results
Working Paper
Stimulus through Insurance: The Marginal Propensity to Repay Debt
Using detailed micro data, we document that households often use "stimulus" checks to pay down debt, especially those with low net wealth-to-income ratios. To rationalize these patterns, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because interest rates rise with debt, borrowers have increasingly larger incentives to use an additional dollar to reduce debt service payments rather than consume. Using our calibrated model, we then study whether and how this marginal propensity to repay debt (MPRD) alters the aggregate implications of fiscal ...
Discussion Paper
Understanding Permanent and Temporary Income Shocks
The earnings of 200 million U.S. workers change each year for various reasons. Some of these changes are anticipated while others are more unexpected. Although many of these changes may be due to pleasant surprises?such as receiving salary raises and promotions?others involve disappointments?such as falling into unemployment. Arguably, some of these factors have rather short-lived effects on an individual?s earnings, whereas others may have permanent effects. Many labor economists have been interested in these various shocks to earnings. How big are the more permanent shocks to earnings? How ...
Discussion Paper
The Reluctance of Firms to Interview the Long-Term Unemployed
Estimates from the Current Population Survey show that the probability of finding a job declines the longer one is unemployed. Is this due to a loss of skills from being unemployed, employer discrimination against the long-term unemployed, or are there characteristics of workers in this segment of the workforce that lower their probability of finding a job? Studies that send out fictitious resumes find that employers do consider the length of unemployment in deciding whom to interview. Our recent work examines how such employer screening based on unemployment duration ultimately affects ...
Discussion Paper
Who’s Ready to Spend? Constrained Consumption across the Income Distribution
Spending on goods and services that were constrained during the pandemic is expected to grow at a fast pace as the economy reopens. In this post, we look at detailed spending data to track which consumption categories were the most constrained by the pandemic due to social distancing. We find that, in 2019, high-income households typically spent relatively more on these pandemic-constrained goods and services. Our findings suggest that these consumers may have strongly reduced consumption during the pandemic and will likely play a crucial role in unleashing pent-up demand when pandemic ...
Report
Latent Heterogeneity in the Marginal Propensity to Consume
We estimate the unconditional distribution of the marginal propensity to consume (MPC) using clustering regression and the 2008 stimulus payments. Since we do not measure heterogeneity as the variation of MPCs with observables, we can recover the full distribution of MPCs. Households spent at least one quarter of the rebate, and individual households used rebates for different goods. While many observables are individually correlated with our estimated MPCs, these relationships disappear when tested jointly, except for nonsalary income and the average propensity to consume. Household ...
Discussion Paper
Whither Labor Force Participation?
Halting a nearly decade-long downward trend, the U.S. labor force participation rate (LFPR) has flattened since 2016, fluctuating within a narrow range a little below 63 percent. What role has the economy played in this change and what can we expect for the future? In this post, we investigate the extent to which the recent flattening of participation can be attributed to the simultaneous robust improvement in the labor market. We also assess the future path of participation in the medium run should labor market conditions improve further.
Discussion Paper
What Have Workers Done with the Time Freed up by Commuting Less?
The COVID-19 pandemic has dramatically changed the way Americans spend their time. One of the most enduring shifts has occurred in the workplace, with millions of employees making the switch to work from home. Even as the pandemic has waned, more than 15 percent of full-time employees remain fully remote and an additional 30 percent work in hybrid arrangements (Barrero, Bloom, and Davis). These changes have substantially reduced time spent commuting to work; in the aggregate, Americans now spend 60 million fewer hours traveling to work each day. In this post, we investigate how people spend ...
Discussion Paper
Searching for Higher Wages
Since the peak of the recession, the unemployment rate has fallen by almost 5 percentage points, and observers continue to focus on whether and when this decline will lead to robust wage growth. Typically, in the wake of such a decline, real wages grow since there is more competition for workers among potential employers. While this relationship has historically been quite informative, real wage growth more recently has not been commensurate with observed declines in the unemployment rate.
Discussion Paper
Not Just “Stimulus” Checks: The Marginal Propensity to Repay Debt
Households frequently use stimulus checks to pay down existing debt. In this post, we discuss the empirical evidence on this marginal propensity to repay debt (MPRD), and we present new findings using the Survey of Consumer Expectations. We find that households with low net wealth-to-income ratios were more prone to use transfers from the CARES Act of March 2020 to pay down debt. We then show that standard models of consumption-saving behavior can be made consistent with these empirical findings if borrowers’ interest rates rise with debt. Our model suggests that fiscal policy may face a ...
Discussion Paper
Which Workers Bear the Burden of Social Distancing Policies?
In the wake of the coronavirus outbreak, nearly all U.S. states imposed social distancing policies to combat the spread of illness. To the extent that work can be done from home, some workers moved their offices to their abodes. Others, however, are unable to continue working as their usual tasks require a specific location or environment, or involve close proximity to others. Which types of jobs cannot be done from home and which types of jobs require close personal proximity to others? What share of overall U.S. employment falls in these categories? And, given that these jobs will be the ...