Search Results
Report
Labor Market Policies during an Epidemic
We study the positive and normative implications of labor market policies that counteract the economic fallout from containment measures during an epidemic. We incorporate a standard epidemiological model into an equilibrium search model of the labor market to compare unemployment insurance (UI) expansions and payroll subsidies. In isolation, payroll subsidies that preserve match capital and enable a swift economic recovery are preferred over a cost-equivalent UI expansion. When considered jointly, however, a cost-equivalent optimal mix allocates 20 percent of the budget to payroll subsidies ...
Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—employment losses relative to an efficient allocation where the planner can costlessly reallocate unemployed workers across sectors to maximize output—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery episode characterized by labor shortages. We find that, for the first time in our sample, mismatch unemployment turned negative at the onset of the pandemic. This result suggests that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more-productive jobs, ...
Working Paper
How Should Unemployment Insurance Vary over the Business Cycle?
We study optimal unemployment insurance (UI) over the business cycle using a heterogeneous agent job search model with aggregate risk and incomplete markets. We validate the model-implied micro and macro labor market elasticities to changes in UI generosity against existing estimates, and provide an explanation for divergent empirical findings. We show that generating the observed demographic differences between UI recipients and non-recipients is critical in determining the magnitudes of these elasticities. We find that the optimal policy features countercyclical replacement rates with ...
Working Paper
Labor Market Policies During an Epidemic
We study the positive and normative implications of labor market policies that counteract the economic fallout from containment measures during an epidemic. We incorporate a standard epidemiological model into an equilibrium search model of the labor market to compare unemployment insurance (UI) expansions and payroll subsidies. In isolation, payroll subsidies that preserve match capital and enable a swift economic recovery are preferred over a cost-equivalent UI expansion. When considered jointly, however, a cost-equivalent optimal mix allocates 20 percent of the budget to payroll subsidies ...
Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
We examine the extent to which mismatch unemployment—excess unemployment from a mismatch between sectors where job seekers search for work and sectors where jobs are available—shaped labor market dynamics during the COVID-19 pandemic and the subsequent recovery. We find that the mismatch index turned negative at the onset of the pandemic for the first time since 2000, suggesting that the efficient allocation of job seekers would involve reallocating workers toward longer-tenure and more productive jobs, even at the expense of fewer hires. We show that sectoral differences in job ...
Working Paper
Spousal Labor Supply Response to Job Displacement and Implications for Optimal Transfers
I document a small spousal earnings response to the job displacement of the family head. The response is even smaller in recessions, when earnings losses are larger and additional insurance is valuable. Using cross-state differences in transfer generosity, I find that generous transfers substantially crowd out the spousal earnings response. To study its policy implications, I develop an incomplete markets model with family labor supply and aggregate fluctuations, where predicted labor supply elasticities to taxes and transfers are in line with empirical estimates both in aggregate and across ...
Working Paper
The Allocation of Immigrant Talent: Macroeconomic Implications for the U.S. and Across Countries
We quantify the barriers to the economic integration of immigrants using an occupational choice model with natives and immigrants of multiple types subject to wedges that distort their allocations. We show that key parameters, including wedges, can be estimated to match the distribution of employment and earnings across individuals and occupations. We find sizable output gains from removing immigrant wedges in the U.S., accounting for 7 percent of immigrants' overall economic contribution. These gains arise from increased labor force participation and from reallocation from manual toward ...
Working Paper
Dissecting the Great Retirement Boom
Between 2020 and 2023, the fraction of retirees in the working-age population in the U.S. increased above its pre-pandemic trend. Several explanations have been proposed to rationalize this gap, such as the rise in net worth due to higher asset returns, the labor market's deterioration due to higher unemployment risk, the expansion of fiscal support programs, and increased mortality risk. We quantitatively study the interaction of these factors and decompose their relative contribution to the recent rise in retirements using an incomplete markets, overlapping generations model with a ...
Working Paper
The Implications of Labor Market Heterogeneity on Unemployment Insurance Design
We digitize state-level and time-varying unemployment insurance (UI) laws on initial eligibility, payment amount, and payment duration and combine them with microdata on labor market outcomes to estimate UI eligibility, take-up, and replacement rates at the individual level. We document how levels of income and wealth affect unemployment risk, eligibility, take-up, and replacement rates both upon job loss and over the course of unemployment spells. We evaluate whether these empirical findings are important for shaping UI policy design using a general equilibrium incomplete markets model ...
Journal Article
Unintended Consequences of Coronavirus-Related Unemployment Insurance Tax Laws
Waived employer payroll tax increases for state unemployment insurance appear to have increased layoffs.