Search Results
Working Paper
The Short and the Long of It: Stock-Flow Matching in the US Housing Market
This paper investigates the US housing market from just before the Great Recession onward (2006–19) and assesses the viability of stock-flow matching in generating the observed outcomes. The paper documents that the probability that a house sells declines sharply after listing for two weeks. Moreover, the probability and associated price of a fast sale recover from the housing slump sooner, faster, and more prominently than slower sales. The simulated stock-flow matching model can mimic not only sales, prices, listings, and time-on-market but also capture the distinctions in quick and ...
Working Paper
Price distributions and competition
Considerable evidence demonstrates that significant dispersion exists in the prices charged for seemingly homogeneous goods. This paper adopts a simple, flexible equilibrium model of search to investigate the way the market structure influences price dispersion. Using the noisy search approach, the paper demonstrates the effects of having a single large, price-leading firm with multiple outlets and a competitive fringe of small firms with one retail outlet each.
Working Paper
Job search with bidder memories
This paper revisits the no-recall assumption in job search models with take-it-or-leave-it offers. Workers who can recall previously encountered potential employers in order to engage them in Bertrand bidding have a distinct advantage over workers without such attachments. Firms account for this difference when hiring a worker. When a worker first meets a firm, the firm offers the worker a sufficient share of the match rents to avoid a bidding war in the future. The pair share the gains to trade. In this case, the Diamond paradox no longer holds.
Working Paper
Sector-specific human capital and the distribution of earnings
This paper incorporates assignment frictions and sector-specific training into the Roy model of occupational choice. Assignment frictions represent the extent of the market whereas differences in sector-specific training reflect worker specialization. This framework thus captures Adam Smith's idea that the extent of the market determines the division of labor. The paper demonstrates the way in which the relationship between assignment frictions and specialization affects the level and composition of human capital acquisition, aggregate output, and the distribution of income. Not surprisingly, ...
Working Paper
Wage dispersion and wage dynamics within and across firms
This paper examines wage dispersion and wage dynamics in a stock-flow matching economy with on-the-job search. Under stock-flow matching, job seekers immediately become fully informed about the stock of viable vacancies. If only one option is available, monopsony wages result. With more than one firm bidding, Bertrand wages arise. The initial and expected threat of competition determines the evolution of wages and thereby introduces a novel way of understanding wage differences among similar workers. The resulting wage distribution has an interior mode and prominent, well-behaved tails. The ...
Report
Why is automobile insurance in Philadelphia so damn expensive?
We document and attempt to explain the observation that automobile insurance premiums vary dramatically across local markets. We argue high premiums can be attributed to the large numbers of uninsured motorists in some cities, while at the same time, the uninsured motorists can be attributed to high premiums. We construct a simple noncooperative equilibrium model, where limited liability can generate inefficient equilibria with uninsured drivers and high, yet actuarially fair, premiums. For certain parameterizations, an optimal full insurance equilibrium and inefficient high price equilibria ...
Working Paper
Human capital portfolios
This paper assesses the trade-off between acquiring specialized skills targeted for a particular occupation and acquiring a package of skills that diversifies risk across occupations. Individual-level data on college credits across subjects and labor-market dynamics reveal that diversification generates higher income growth for individuals who switch occupations whereas specialization benefits those who stick with one type of job. A human capital portfolio choice problem featuring skills, abilities, and uncertain labor outcomes replicates this general pattern and generate a sizable amount of ...