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Working Paper
Dynamic Labor Reallocation with Heterogeneous Skills and Uninsured Idiosyncratic Risk
Faia, Ester; Shabalina, Ekaterina; Kudlyak, Marianna (2021-06-10)
Occupational specificity of human capital motivates an important role of occupationalreallocation for the economy’s response to shocks and for the dynamics of inequality.We introduce occupational mobility, through a random choice model with dynamicvalue function optimization, into a multi-sector/multi-occupation Bewley (1980)-Aiyagari (1994) model with heterogeneous income risk, liquid and illiquid assets, priceadjustment costs, and in which households differ by their occupation-specific skills.Labor income is a combination of endogenous occupational wages and idiosyncraticshock. ...
Working Paper Series , Paper 2021-16

Working Paper
Labor Market Tightness during WWI and the Postwar Recession of 1920-1921
Anderson, Haelim; Chang, Jin-Wook (2022-08-01)
The U.S. economy entered the 1920s with a robust job market and high inflation but fell into a recession following the Federal Reserve's discount rate hikes to tame inflation. Using a newly constructed data set, we study labor market dynamics during this period. We find that labor markets were tight when the Federal Reserve began tightening monetary policy, but they became loose following the tightening as the recession deepened. The demand-supply imbalance in the labor market was driven by a sharp decline in the number of job openings. We also show that the recession had an uneven effect on ...
Finance and Economics Discussion Series , Paper 2022-049

Working Paper
Modeling Labor Markets in Macroeconomics: Search and Matching
Lubik, Thomas A.; Krause, Michael U. (2014-12-15)
We present and discuss the simple search and matching model of the labor market against the background of developments in modern macroeconomics. We derive a simple representation of the model in a general equilibrium context and how the model can be used to analyze various policy issues in labor markets and monetary policy.
Working Paper , Paper 14-19

Working Paper
The Economic Effects of a Rapid Increase in the Minimum Wage: Evidence from South Korea Experiments
Kim, Sungil; Lee, Hwanoong; Song, Kyungho; Doh, Taeyoung; Kim, Kyoo il (2022-11-07)
South Korea raised the nationwide minimum wage substantially in 2018 and 2019, and the minimum wage rose from 53 percent of the median wage to 63 percent. While the minimum wage has been increasing steadily over decades, the rapid pace in 2018–19 was largely unexpected and driven by a sudden shift in the political environment. We study the economic effects of this minimum wage hike on employment, wages, and labor productivity using South Korean manufacturing firm data. To ensure that sector-specific factors do not drive our main results, we supplement our analysis with data sources covering ...
Research Working Paper , Paper RWP 22-13

Working Paper
Entry, Variable Markups, and Business Cycles
Gamber, William L. (2021-12-02)
The creation of new businesses declines in recessions. In this paper, I study the effects of pro-cyclical business formation on aggregate employment in a general equilibrium model of firm dynamics. The key features of the model are that the elasticity of demand faced by firms falls with their market share and that adjustment costs slow the reallocation of employment between firms. In response to a decline in entry, incumbent firms' market shares increase, their elasticity of demand falls, and they increase their markups and reduce employment. To quantify the model, I study the relationship ...
Finance and Economics Discussion Series , Paper 2021-077

Report
The role of start-ups in structural transformation
Karahan, Fatih; Sahin, Aysegul; Dent, Robert C.; Pugsley, Benjamin (2016-01-01)
The U.S. economy has been going through a striking structural transformation?the secular reallocation of employment across sectors?over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, owing to sectors receiving shares of start-up employment that differ from their overall employment shares. The rest is mostly the result of life cycle differences across sectors. Declining overall ...
Staff Reports , Paper 762

Working Paper
Understanding Growth Through Automation: The Neoclassical Perspective
Tavares, Marina; Drozd, Lukasz A.; Taschereau-Dumouchel, Mathieu (2022-08-26)
We study how advancements in automation technology affect the division of aggregate income between capital and labor in the context of long-run growth. Our analysis focuses on the fundamental trade-off between the labor-displacing effect of automation and its positive productivity effect in an elementary task-based framework featuring a schedule of automation prices across tasks linked to the state of technology. We obtain general conditions for the automation technology and technical change driving automation to be labor-share displacing. We identify a unique task technology that reconciles ...
Working Papers , Paper 22-25

Working Paper
Income-Driven Labor-Market Polarization
Mestieri, Martí; Comin, Diego; Danieli, Ana (2020-10-23)
We propose a mechanism for labor-market polarization based on the nonhomotheticity of demand that we call the income-driven channel. Our mechanism builds on a novel empirical fact: expenditure elasticities and production intensities in low- and high-skill occupations are positively correlated across sectors. Thus, as income grows, demand shifts towards expenditure-elastic sectors, and the relative demand for low- and high-skill occupations increases, causing labor-market polarization. A calibrated general-equilibrium model suggests this mechanism accounts for 90% and 35% of the increase in ...
Working Paper Series , Paper WP-2020-22

Working Paper
Health versus Wealth: On the Distributional Effects of Controlling a Pandemic
Heathcote, Jonathan; Krueger, Dirk; Rios-Rull, Jose-Victor; Glover, Andrew (2020-05-10)
To slow the spread of COVID-19, many countries are shutting down nonessential 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 a ...
Research Working Paper , Paper RWP 20-03

Working Paper
Entrepreneurship and State Taxation
Decker, Ryan A.; Curtis, E. Mark (2018-01-11)
Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively?and disproportionately?affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in ...
Finance and Economics Discussion Series , Paper 2018-003

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