Search Results
Working Paper
Offshoring, Mismatch, and Labor Market Outcomes
We study the role of labor market mismatch in the adjustment to a trade liberalization that results in the offshoring of high-tech production. Our model features two-sided heterogeneity in the labor market: high- and low-skilled workers are matched in a frictional labor market with high- and low-tech firms. Mismatch employment occurs when high-skilled workers choose to accept a less desirable job in the low-tech industry. The main result is that--perhaps counter-intuitively--this type of job displacement is actually beneficial for the labor market in the country doing the offshoring. Mismatch ...
Working Paper
Beyond the Unemployment Rate: A Structural Labor Market Indicator
Labor market variables frequently send conflicting signals about the degree of slack or tightness, often complicating policy assessments at critical junctures. This paper develops a Structural Labor Market Indicator (SLMI) for the U.S. economy that addresses the limitations of existing univariate measures or atheoretical statistical approaches that synthesize multiple labor market indicators but cannot distinguish between supply and demand driving forces. We construct the SLMI using a medium scale New Keynesian DSGE model featuring search and matching frictions, endogenous labor force ...
Working Paper
Optimal Short-Time Work Policy in Recessions
Short-time work (STW) is a subsidy program linked to a reduction in working hours that has been widely used across Europe and partly used in some US states to combat job losses in the Great Recession and the COVID-19 pandemic. Although typically used alongside an unemployment insurance (UI) system, the interaction between STW and UI remains conceptually unclear. To close this gap in the literature, I develop a search and matching model of the labor market with risk-averse workers, flexible hours choice, endogenous separations, and generalized Nash bargaining. Deriving closed-form expressions ...
Working Paper
Sectoral Shocks, Reallocation, and Labor Market Policies
Unemployment insurance and wage subsidies are key tools to support labor markets in recessions. We develop a multi-sector search and matching model with on-the-job human capital accumulation to study labor market policy responses to sector-specific shocks. Our calibration accounts for structural differences in labor markets between the United States and the euro area, including a lower job-finding rate in the latter. We use the model to evaluate unemployment insurance and wage subsidy policies in recessions of different duration. We find that, after a temporary sector-specific shock, ...
Working Paper
National and Regional Housing Vacancy: Insights Using Markov-switching Models
We examine homeowner vacancy rates over time and space using Markov-switching models. Our theoretical analysis extends the Wheaton (1990) search and matching model for housing by incorporating regime-switching behavior and interregional spillovers. Our approach is strongly supported by our empirical results. Estimations, using constant-only as well as Vector Autoregressions, allow us to examine differences in vacancy rates as well as explore the possibility of asymmetries within and across housing markets, depending on the state/regime (e.g., low or high vacancy) of a given housing market. ...
Working Paper
Declining Labor Turnover and Turbulence
(supersedes WP 15-29)The rate of job loss has been on a secular decline for the last four decades or longer. Changes in demographics or industry composition do not account for the trend. This paper seeks to identify possible sources of this decline using a simple labor matching model with two types of workers, experienced and inexperienced, where the former type faces a risk of skill loss during unemployment. When the skill loss occurs, the worker is required to restart his career and thus suffers a drop in his wage. I show that a higher risk of skill loss results in a lower job separation ...
Working Paper
Endogenous Labor Supply in an Estimated New-Keynesian Model: Nominal versus Real Rigidities
Standard macroeconomic models find it difficult to reconcile slow recoveries and missing disinflations after deep deteriorations in the labor market. We develop and estimate a New-Keynesian model with search and matching frictions in the labor market, endogenous intensive and extensive labor supply decisions, and financial frictions. We conclude that the estimated combination of a low degree of nominal wage rigidities and a high degree of real wage rigidities, together with a small role for pre-match costs relative to post-match costs, is key in successfully forecasting slow recoveries in ...
Working Paper
Unemployment Insurance during a Pandemic
The CARES Act implemented in response to the COVID-19 crisis dramatically increases the generosity of unemployment insurance (UI) benefits, triggering concerns about its substantial impact on unemployment. This paper combines a labor market search-matching model with the SIR-type infection dynamics to study the effects of CARES UI on both unemployment and infection. More generous UI policies create work disincentives and lead to higher unemployment, but they also reduce infection and save lives. Economic shutdown policies further amplify these effects of UI policies. Quantitatively, the CARES ...
Working Paper
Is Mortgage Lock-In Responsible for Housing Market Tightness?
Elevated mortgage rates discourage homeowners from moving, as relocating triggers a reset of mortgage terms — a phenomenon termed “lock-in.” This paper examines whether elevated rates explain recent real estate market tightness: low transaction volumes, low time-on-market, and sustained price growth. Using transaction-level data, we estimate survival models of housing tenures — the probability of sale as a function of tenure and market conditions, including mortgage rate gaps. These estimates quantify missing sellers who have not entered the market because of elevated rates. We then ...
Working Paper
Worker flows and job flows: a quantitative investigation
This paper studies quantitative properties of a multiple-worker firm search/matching model and investigates how worker transition rates and job flow rates are interrelated. We show that allowing for job-to-job transitions in the model is essential to simultaneously account for the cyclical features of worker transition rates and job flow rates. Important to this result are the distinctions between the job creation rate and the hiring rate and between the job destruction rate and the layoff rate. In the model without job-to-job transitions, these distinctions essentially disappear, thus making ...