Search Results
Working Paper
Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market
Just as employers face uncertainty when hiring workers, workers also face uncertainty when accepting employment, and bad employers may opportunistically depart from expectations, norms, and laws. However, prior research in economics and information sciences has focused sharply on the employer?s problem of identifying good workers rather than vice versa. This issue is especially pronounced in markets for gig work, including online labor markets, where platforms are developing strategies to help workers identify good employers. We build a theoretical model for the value of such reputation ...
Working Paper
How Should Unemployment Insurance Vary over the Business Cycle?
We study optimal unemployment insurance (UI) over the business cycle using a heterogeneous agent job search model with aggregate risk and incomplete markets. We validate the model-implied micro and macro labor market elasticities to changes in UI generosity against existing estimates, and provide an explanation for divergent empirical findings. We show that generating the observed demographic differences between UI recipients and non-recipients is critical in determining the magnitudes of these elasticities. We find that the optimal policy features countercyclical replacement rates with ...
Working Paper
Labor Market Policies During an Epidemic
We study the positive and normative implications of labor market policies that counteract the economic fallout from containment measures during an epidemic. We incorporate a standard epidemiological model into an equilibrium search model of the labor market to compare unemployment insurance (UI) expansions and payroll subsidies. In isolation, payroll subsidies that preserve match capital and enable a swift economic recovery are preferred over a cost-equivalent UI expansion. When considered jointly, however, a cost-equivalent optimal mix allocates 20 percent of the budget to payroll subsidies ...
Working Paper
Spousal Labor Supply Response to Job Displacement and Implications for Optimal Transfers
I document a small spousal earnings response to the job displacement of the family head. The response is even smaller in recessions, when earnings losses are larger and additional insurance is most valuable. I investigate whether the small response is an outcome of the crowding-out effects of government transfers. To accomplish this, I use an incomplete markets model with family labor supply and aggregate fluctuations where predicted spousal labor supply elasticities with respect to transfers are in line with microeconomic estimates both in aggregate and across subpopulations. Counterfactual ...
Working Paper
Labor Market Policies During an Epidemic
We study the positive and normative implications of labor market policies that counteract the economic fallout from containment measures during an epidemic. We incorporate a standard epidemiological model into an equilibrium search model of the labor market to compare unemployment insurance (UI) expansions and payroll subsidies. In isolation, payroll subsidies that preserve match capital and enable a swift economic recovery are preferred over a cost-equivalent UI expansion. When considered jointly, however, a cost-equivalent optimal mix allocates 20 percent of the budget to payroll subsidies ...
Working Paper
Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity
We document considerable scope of heterogeneity within the unemployed, especially when the unemployed are divided along eligibility and receipt of unemployment insurance (UI). We develop a heterogeneous-agent job-search model capable of matching the wealth and income differences that distinguish UI recipients from non-recipients. Labor market responses to UI changes are non-monotonic in wealth because the poorest individuals exhibit weak responses due to the high value they attribute to employment. Differential elasticities imply that the extent to which structural models account for the ...
Working Paper
Interactions between job search and housing decisions: a structural estimation
In this paper, we investigate to what extent shocks in housing and financial markets account for wage and employment variations in a frictional labor market. To explain these interactions, we use a model of job search with accumulation of wealth as liquid funds and residential real estate, in which house prices are randomly persistent. First, we show that reservation wages and unemployment are increasing in total wealth. And, second, we show that reservation wages and unemployment are also responsive to the composition of wealth. Specifically, when house prices are expected to rise, holding a ...
Working Paper
Spousal Labor Supply Response to Job Displacement and Implications for Optimal Transfers
I document a small spousal earnings response to the job displacement of the family head. The response is even smaller in recessions, when earnings losses are larger and additional insurance is valuable. Using cross-state differences in transfer generosity, I find that generous transfers substantially crowd out the spousal earnings response. To study its policy implications, I develop an incomplete markets model with family labor supplyand aggregate fluctuations, where predicted labor supply elasticities to taxes and transfers are in line with empirical estimates both in aggregate and across ...
Working Paper
Designing Unemployment Insurance for Developing Countries
The high incidence of informality in the labor markets of middle-income economies challenges the provision of unemployment protection. We show that, despite informational frictions, introducing an unemployment insurance savings account (UISA) system may provide substantial benefits. This system improves welfare by providing insurance to the unemployed and creating incentives to work in the formal sector. The optimal scheme generates a reduction in unemployment (from 4 to 3 percent), an increase in formality (from 68 to 72 percent), and a rise in total output (by 4 percent). Overall, ...
Working Paper
Labor Market Shocks and Monetary Policy
We develop a heterogeneous agent New Keynesian model featuring a frictional labor market with on-the-job search to quantitatively study the positive and normative implications of employer-to-employer (EE) transitions for macroeconomic outcomes and monetary policy. We find that EE dynamics played an important role in shaping inflation dynamics during the Great Recession and COVID-19 recoveries, with the former exhibiting subdued EE transitions and inflation despite both episodes sharing similar unemployment dynamics. Optimal monetary policy prescribes a strong positive response to EE ...