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Working Paper
Equilibrium Unemployment: The Role of Discrimination
U.S. labor markets are increasingly diverse and persistently unequal between genders, races and ethnicities, skill levels, and age groups. We use a structural model to decompose the observed differences in labor market outcomes across demographic groups in terms of underlying wedges in fundamentals. Of particular interest is the potential role of discrimination, either taste-based or statistical. Our model is a version of the Diamond-Mortensen-Pissarides model extended to include a life cycle, learning by doing, a nonparticipation state, and informational frictions. The model exhibits ...
Working Paper
Endogenous Bargaining Power and Declining Labor Compensation Share
Workhorse search and matching models assume constant bargaining weights, while recent evidence indicates that weights vary across time and in cross section. We endogenize bargaining weights in a life-cycle search and matching model by replacing a standard Cobb-Douglas (CD) matching function with a general constant elasticity of substitution (CES) matching function and study the implications for the long-term labor share and bargaining power in the U.S. The CES model explains 64 percent of the reported decline in the labor share since 1980, while the CD model explains only 28 percent of the ...