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Working Paper
Declining labor turnover and turbulence
Superseded by 18-06. The purpose of this paper is to identify possible sources of the secular decline in the job separation rate over the past four decades. I use 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 separation rate. The key mechanism is that the experienced workers accept lower wages in exchange for keeping ...
Working Paper
COVID-19: A View from the Labor Market
This paper examines the response of the U.S. labor market to a large and persistent job separation rate shock, motivated by the ongoing economic effects of the COVID-19 pandemic. We use nonlinear methods to analytically and numerically characterize the responses of vacancy creation and unemployment. Vacancies decline in response to the shock when firms expect persistent job destruction and the number of unemployed searching for work is low. Quantitatively, under our baseline forecast the unemployment rate peaks at 19.7%, 2 months after the shock, and takes 1 year to return to 5%. Relative to ...
Working Paper
The Business Cycle Mechanics of Search and Matching Models
This paper estimates a real business cycle model with unemployment driven by shocks to labor productivity and the job separation rate. We make two contributions. First, we develop a new identification scheme based on the matching elasticity that allows the model to perfectly match a range of labor market moments, including the volatilities of unemployment and vacancies. Second, we use our model to revisit the importance of shocks to the job separation rate and highlight how their correlation with labor productivity affects their transmission mechanism.
Report
Labor Market Dynamics and Development
We build a dataset of harmonized rotating panel labor force surveys covering 42 countries across a wide range of development and document three new empirical findings on labor market dynamics. First, labor market flows (job-finding rates, employment-exit rates, and job-to-job transition rates) are two to three times higher in the poorest as compared with the richest countries. Second, employment hazards in poorer countries decline more sharply with tenure; much of their high turnover can be attributed to high separation rates among workers with low tenure. Third, wage-tenure profiles are much ...