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Working Paper
The Business Cycle Mechanics of Search and Matching Models
Bernstein, Joshua; Throckmorton, Nathaniel A.; Richter, Alexander W. (2020-08-25)
This paper estimates a real business cycle model with unemployment driven by shocks to labor productivity and the job separation rate. We make two contributions. First, we develop a new identification scheme based on the matching elasticity that allows the model to perfectly match a range of labor market moments, including the volatilities of unemployment and vacancies. Second, we use our model to revisit the importance of shocks to the job separation rate and highlight how their correlation with labor productivity affects their transmission mechanism.
Working Papers , Paper 2026

Working Paper
Changing Jobs to Fight Inflation: Labor Market Reactions to Inflationary Shocks
Bostanci, Gorkem; Koru, Omer; Villalvazo, Sergio (2025-06-04)
We argue that inflationary shocks affect allocative efficiency by changing the rate and the characteristics of workers’ job-to-job transitions. First, using monetary policy shocks and survey data on search effort, we empirically show that a one percentage point rise in inflation increases job-to-job transitions by up to 4.5%, and workers with higher inflation expectations are more likely to search and do so more effectively. Second, we build a general equilibrium model of directed on-the-job search to quantify the aggregate implications of labor market reactions. Higher-than-expected ...
Finance and Economics Discussion Series , Paper 2025-042

Working Paper
Declining Search Frictions, Unemployment, and Growth Revisited
Córdoba, Juan C.; Isojärvi, Anni T.; Li, Haoran (2025-10-31)
This paper revisits the conditions under which search models generate balanced growth paths (BGPs)—equilibria where unemployment, vacancies, and job flows remain steady as search frictions decline. Martellini and Menzio (2020) claim that such paths exist only when matches are “inspection goods” and match quality follows a Pareto distribution. We show that these conditions are sufficient but not necessary. Their implementation assumes a strong form of stationarity—requiring the endogenous distribution of match qualities to remain invariant under proportional scaling. This restriction ...
Finance and Economics Discussion Series , Paper 2025-098

Working Paper
Age and Gender Differentials in Unemployment and Hysteresis
Owyang, Michael T.; Guisinger, Amy Y.; Jackson, Laura E. (2022-07-21)
We use a time-varying panel unobserved components model to estimate unemployment gaps disaggregated by age and gender. Recessions before COVID affected men's labor market outcomes more than women's; however, the reverse was true for the COVID recession, with effects amplified for younger workers. The aggregate Phillips curve flattens over time and hysteresis is countercyclical for all groups. We find heterogeneity in both the Phillips curve and hysteresis coefficients, with wages responding more to workers with an outside option (high school- and retirement-age) and larger effects of ...
Working Papers , Paper 2022-015

Report
The Macroeconomic Dynamics of Labor Market Policies
Hurst, Erik; Kehoe, Patrick J.; Pastorino, Elena; Winberry, Thomas (2025-03-28)
We develop a dynamic macroeconomic framework with worker heterogeneity, putty-clay adjustment frictions, and firm monopsony power to study the distributional impact of labor market policies over time. Our framework reconciles the well-known tension between low short-run and high long-run elasticities of substitution across inputs of production, especially among workers with different skills within a same education group. We use this framework to evaluate the effects of redistributive policies such as the minimum wage and the Earned Income Tax Credit. We argue that since these policies ...
Staff Report , Paper 668

Working Paper
Firm Entry and Macroeconomic Dynamics: A State-level Analysis
Siemer, Michael; Gourio, Francois; Messer, Todd (2016-02)
Using an annual panel of US states over the period 1982-2014, we estimate the response of macroeconomic variables to a shock to the number of new firms (startups). We find that these shocks have significant effects that persist for many years on real GDP, productivity, and population. This result is consistent with simple models of firm dynamics where a ?missing generation? of firms affects productivity persistently.
Finance and Economics Discussion Series , Paper 2016-043

Working Paper
Hours Worked and Lifetime Earnings Inequality
Bick, Alexander; Rogerson, Richard; Blandin, Adam (2024-09-16)
We document large differences in lifetime hours of work using data from the NLSY79 and argue that these differences are an important source of inequality in lifetime earnings. To establish this we develop and calibrate a rich heterogeneous agent model of labor supply and human capital accumulation that allows for heterogeneity in preferences for work, initial human capital and learning ability, as well as idiosyncratic shocks to human capital throughout the life-cycle. Our calibrated model implies that almost 20 percent of the variance in lifetime earnings is accounted for by differences in ...
Working Papers , Paper 2024-024

Working Paper
Mismatch Unemployment During COVID-19 and the Post-Pandemic Labor Shortages
Mercan, Yusuf; See, Kurt; Birinci, Serdar (2024-09-19)
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 Papers , Paper 2024-025

Working Paper
Uncertainty and Labor Market Fluctuations
Lee, Justin J.; Jo, Soojin (2019-07-02)
We investigate how a macroeconomic uncertainty shock affects the labor market. We focus on the uncertainty transmission mechanism, for which we employ a set of worker flow indicators in addition to labor stock variables. We incorporate common factors from such indicators into a framework that can simultaneously estimate historical macroeconomic uncertainty and its impacts on the macroeconomy and labor market. We find firms defer hiring as the real option value of waiting increases. Moreover, significantly more workers are laid off while voluntary quits drop, suggesting other mechanisms such ...
Working Papers , Paper 1904

Working Paper
The Implications of Labor Market Heterogeneity for Unemployment Insurance Design
Birinci, Serdar; See, Kurt (2026-01-23)
We estimate unemployment insurance (UI) eligibility, take-up, and replacement rates at the individual level and document how they vary with earnings, wealth, and unemployment duration. We extend a widely used framework that combines an incomplete-markets model with a frictional labor market to match our findings. We show that the optimal UI policy becomes substantially more generous. The gap between optimal policies in the two models is largely driven by endogenous UI take-up, which entails a utility cost: only those who value UI the most choose to take it. The welfare gains from insuring ...
Working Papers , Paper 2024-026

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