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Working Paper
Declining Labor Force Attachment and Downward Trends in Unemployment and Participation
Figura, Andrew; Barnichon, Regis (2013-10-01)
The U.S. labor market witnessed two apparently unrelated secular movements in the last 30 years: a decline in unemployment between the early 1980s and the early 2000s, and a decline in participation since the early 2000s. Using CPS micro data and a stock-flow accounting framework, we show that a substantial, and hitherto unnoticed, factor behind both trends is a decline in the share of nonparticipants who are at the margin of participation. A lower share of marginal nonparticipants implies a lower unemployment rate, because marginal nonparticipants enter the labor force mostly through ...
Finance and Economics Discussion Series , Paper 2013-88

Working Paper
Wage Setting Under Targeted Search
Cheremukhin, Anton A.; Restrepo-Echavarria, Paulina (2020-10)
When setting initial compensation some firms set a fixed non-negotiable wage while others bargain. In this paper we propose a parsimonious search and matching model with two sided heterogeneity, where search intensity and the degree of randomness in matching are endogenous, and firms decide whether to bargain or post wages. We study the implications of heterogeneous search costs and market tightness on the choice of the wage setting mechanism, as well as the relationship between bargaining prevalence and wage level, residual wage dispersion, and labor market tightness. We find that bargaining ...
Working Papers , Paper 2020-041

Working Paper
Targeted search in matching markets
Tutino, Antonella; Restrepo-Echavarria, Paulina; Cheremukhin, Anton A. (2016-05-20)
We propose a parsimonious matching model where people's choice of whom to meet endogenizes the degree of randomness in matching. The analysis highlights the interaction between a productive motive, driven by the surplus attainable in a match, and a strategic motive, driven by reciprocity of interest of potential matches. We find that the interaction between these two motives differs with preferences ? vertical versus horizontal ? and that this interaction implies that preferences estimated using our model can look markedly different from those estimated using a model where the degree of ...
Working Papers , Paper 1610

Working Paper
Human Capital and Unemployment Dynamics: Why More Educated Workers Enjoy Greater Employment Stability
Cairó, Isabel; Cajner, Tomaz (2014-02)
Why do more educated workers experience lower unemployment rates and lower employment volatility? A closer look at the data reveals that these workers have similar job finding rates, but much lower and less volatile separation rates than their less educated peers. We argue that on-the-job training, being complementary to formal education, is the reason for this pattern. Using a search and matching model with endogenous separations, we show that investments in match-specific human capital reduce the outside option of workers, implying less incentives to separate. The model generates ...
Finance and Economics Discussion Series , Paper 2014-09

Working Paper
Job Applications and Labor Market Flows
Birinci, Serdar; See, Kurt; Wee, Shu Lin (2022-02)
Job applications have risen over time yet job-finding rates remain unchanged. Meanwhile, separations have declined. We argue that increased applications raise the probability of a good match rather than the probability of job-finding. Using a search model with multiple applications and costly information, we show that when applications increase, firms invest in identifying good matches, reducing separations. Concurrently, increased congestion and selectivity over which offer to accept temper increases in job-finding rates. Our framework contains testable implications for changes in offers, ...
Working Papers , Paper 2020-023

Working Paper
Implications of Labor Market Frictions for Risk Aversion and Risk Premia
Swanson, Eric T. (2013)
A flexible labor margin allows households to absorb shocks to asset values with changes in hours worked as well as changes in consumption. This ability to absorb shocks along both margins can greatly alter the household?s attitudes toward risk, as shown in Swanson (2012). The present paper analyzes how frictional labor markets affect that analysis. Risk aversion is higher: 1) in recessions, 2) in countries with more frictional labor markets, and 3) for households that have more difficulty finding a job. These predictions are consistent with empirical evidence from a variety of sources. ...
Working Paper Series , Paper 2013-30

Working Paper
Wage Setting Under Targeted Search
Cheremukhin, Anton A.; Restrepo-Echavarria, Paulina (2022-03-23)
When setting initial compensation, some firms set a fixed, non-negotiable wage while others bargain. In this paper we propose a parsimonious search and matching model with two sided heterogeneity, where the choice of wage-setting protocol, wages, search intensity, and degree of randomness in matching are endogenous. We find that posting and bargaining coexist as wage-setting protocols if there is sufficient heterogeneity in match quality, search costs, or market tightness and that labor market tightness and relative costs of search play a key role in the choice of the wage-setting mechanism. ...
Working Papers , Paper 2020-041

Working Paper
Wage Setting Under Targeted Search
Cheremukhin, Anton A.; Restrepo-Echavarria, Paulina (2023-05-03)
When setting initial compensation, some firms set a fixed, non-negotiable wage while others bargain. In this paper we propose a parsimonious search and matching model with two sided heterogeneity, where the choice of wage-setting protocol, wages, search intensity, and degree of randomness in matching are endogenous. We find that posting and bargaining coexist as wage-setting protocols if there is sufficient heterogeneity in match quality, search costs, or market tightness and that labor market tightness and relative costs of search play a key role in the choice of the wage-setting mechanism. ...
Working Papers , Paper 2020-041

Report
The cost of business cycles for unskilled workers
Mukoyama, Toshihiko; Sahin, Aysegul (2005-07-01)
This paper reconsiders the cost of business cycles under incomplete markets. Primarily, we focus on the heterogeneity in the cost of business cycles among agents with different skill levels. Unskilled workers are subject to a much larger risk of unemployment during recessions than are skilled workers. Moreover, unskilled workers earn less income, which limits their ability to self-insure. We examine how this heterogeneity in unemployment risk and income translates into heterogeneity in the cost of business cycles. We set up a dynamic general equilibrium model with incomplete markets, in which ...
Staff Reports , Paper 214

Working Paper
Heterogeneous Agents Dynamic Spatial General Equilibrium
Dvorkin, Maximiliano (2023-03-22)
I develop a dynamic model of migration and labor market choice with incomplete markets and uninsurable income risk to quantify the effects of international trade on workers’ employment reallocation, earnings, and wealth. Macroeconomic conditions in different labor markets and idiosyncratic shocks shape agents’ labor market choices, consumption, earnings, and asset accumulation over time. Despite the rich heterogeneity, the model is highly tractable as the optimal consumption, labor supply, capital accumulation, and migration and reallocation decisions of individual workers across ...
Working Papers , Paper 2023-005

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