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Jel Classification:J64 

Working Paper
The Role of News about TFP in U.S. Recessions and Booms

We develop a general equilibrium model to study the historical contribution of TFP news to the U.S. business cycle. Hiring frictions provide incentives for firms to start hiring ahead of an anticipated improvement in technology. For plausibly calibrated hiring costs, employment gradually rises in response to positive TFP news shocks even under standard preferences. TFP news shocks are identified mainly by current and expected unemployment rates since periods in which average unemployment is relatively high (low) are also periods in which average TFP growth is slow (fast). We work out the ...
Working Paper Series , Paper WP-2018-6

Working Paper
Measuring Heterogeneity in Job Finding Rates among the Non-Employed Using Labor Force Status Histories

We introduce a novel approach to studying heterogeneity in job finding rates by classifying the non-employed, the unemployed and those out of the labor force (OLF), according to their labor force status (LFS) histories using four-month panels in the CPS. Respondents? LFS histories outperform current-month responses to survey questions about duration and reason for unemployment, desire to work, or reasons for not searching in predicting future employment. We find that the best predictor of future employment for the non-employed is their duration since last employment. For those OLF, the ...
Working Paper Series , Paper 2017-20

Working Paper
Efficiency in Sequential Labor and Goods Markets

This paper studies the optimal sharing of value added between consumers, producers, and labor. We first define a constrained optimum. We then compare it with the decentralized allocation. They coincide when the price maximizes the expected marginal revenue of the firm in the goods market, an outcome of the competitive search equilibrium, and when the wage exactly offsets the congestion externality of firm entry in the labor market, which is the traditional Hosios condition. Under price and wage bargaining, this allocation is achieved under a double Hosios condition combining the logic of ...
Working Paper Series , Paper 2018-13

Working Paper
Why Is Current Unemployment So Low?

Current unemployment, as of 2019Q4, is so low not because of unusually high job finding rates out of unemployment, but because of unusually low entry rates into unemployment. The unusually low entry rates, both from employment and from out of the labor force, reflect a long-run downward trend, and have lowered the unemployment rate trend over the recent decade. In fact, the difference between the current unemployment rate and unemployment rates at the two previous cyclical peaks in 2000 and 2007 is more than fully accounted for by the decline in its trend. This suggests that the current low ...
Working Paper Series , Paper 2020-05

Working Paper
The slow job recovery in a macro model of search and recruiting intensity

Despite steady declines in the unemployment rate and increases in the job openings rate after the Great Recession, the hiring rate in the United States has lagged behind. Significant gaps remain between the actual job filling and finding rates and those predicted from the standard labor search model. To examine the forces behind the slow job recovery, we generalize the standard model to incorporate endogenous variations in search intensity and recruiting intensity. Our model features a vacancy creation cost, which implies that firms rely on variations in both the number of vacancies and ...
Working Paper Series , Paper 2016-9

Working Paper
Why Has the US Economy Recovered So Consistently from Every Recession in the Past 70 Years?

It is a remarkable fact about the historical US business cycle that, after unemployment reached its peak in a recession, and a recovery began, the annual reduction in the unemployment rate was stable at around 0.55 percentage points per year. The economy seems to have had an irresistible force toward restoring full employment. There was high variation in monetary and fiscal policy, and in productivity and labor-force growth, but little variation in the rate of decline of unemployment. We explore models of the labor market's self-recovery that imply gradual working off of unemployment ...
Working Paper Series , Paper 2020-20

Working Paper
The Extent and Cyclicality of Career Changes: Evidence for the U.K

U.K. data from 1993-2012 suggest that in economic downturns a smaller fraction of unemployed workers change their career when starting a new job. The proportion of total hires involving a career change also drops. This implies that career changes decline during recessions. The results indicate that recessions are times of subdued reallocation rather than of accelerated and involuntary structural transformation.
Working Paper Series , Paper 2014-21

Working Paper
Doves for the Rich, Hawks for the Poor? Distributional Consequences of Monetary Policy

We build a New Keynesian business-cycle model with rich household heterogeneity. A central feature is that matching frictions render labor-market risk countercyclical and endogenous to monetary policy. Our main result is that a majority of households prefer substantial stabilization of unemployment even if this means deviations from price stability. A monetary policy focused on unemployment stabilization helps Main Street" by providing consumption insurance. It hurts Wall Street" by reducing precautionary saving and, thus, asset prices. On the aggregate level, household heterogeneity ...
International Finance Discussion Papers , Paper 1167

Working Paper
Employment and Firm Heterogeneity, Capital Allocation, and Countercyclical Labor Market Policies

Many countries have large employment shares in micro and small firms that have limited access to formal financing and therefore rely on input credit. Such countries are mainly emerging and developing economies, whose business cycle dynamics are increasingly important for the global economy in light of the dramatic rise in international linkages and spillovers that have occurred over the last several decades. Emerging and developing economies implemented a host of countercyclical labor market policies amid the global financial crisis, but data limitations on high-frequency labor and job flows ...
International Finance Discussion Papers , Paper 1115

Working Paper
The Self-Employment Option in Rigid Labor Markets: An Empirical Investigation

This paper studies selection into and returns to self-employment in labor markets with stringent employment protection. Using Spanish administrative panel data, we characterize self-employment dynamics in the presence of rigidities that affect workers? outside options. We document the negative selection into self-employment when workers enter from unemployment, and the pro-cyclicality of the decision. We identify career heterogeneity in the data and estimate a rich life-cycle income process. The self-employed face shocks with smaller variances but lower returns compared to fixed-term ...
International Finance Discussion Papers , Paper 1264

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