“Testing the Independence of Job Arrival Rates and Wage Offers,” joint with Christine Braun, Bryan Engelhardt, and Peter Rupert (Labour Economics, vol 63, April 2020)
Abstract: Is the arrival rate of a job independent of the wage that it pays? We answer this question by testing whether unemployment insurance alters the job finding rate differentially across the wage distribution. To do this, we use a Mixed Proportional Hazard Competing Risk Model in which we classify quantiles of the wage distribution as competing risks faced by searching unemployed workers. Allowing for flexible unobserved heterogeneity across spells, we find that unemployment insurance increases the likelihood that a searcher matches to higher paying jobs relative to low or medium paying jobs, rejecting the notion that wage offers and job arrival rates are independent. We show that dependence between wages and job offer arrival rates explains 9% of the increase in the duration of unemployment associated with unemployment insurance.
Note: Previously circulated under the title “Do Workers Direct their Search?” and “Testing the Independence of Job Arrival Rates and Wage Offers in Model of Job Search”
“Search and the Sources of Life-Cycle Inequality,” (conditionally accepted at International Economic Review)
Note: Previously circulated under the titles “Borrowing Constraints, Search, and Life-Cycle Inequality” and “Wealth Effects, Search, and Life-Cycle Inequality”
Abstract: We develop a model that allows us to understand the cyclicality of part and full-time employment. In the model, labor market frictions generate a surplus between workers and firms, who jointly decide whether their employment relationship is best suited for part or full-time work based on match quality shocks and the broader economic environment. Lower acyclical costs cause the surplus of part-time matches to vary less with the business cycle than the surplus of full-time matches. As a consequence, the model is able to generate procyclical full-time employment and countercyclical part-time employment as observed in the data. We also show that ignoring part-time employment understates the impact on employment and inequality of a recession and that subsidizing part-time work is far more effective than increasing unemployment insurance at preventing a labor market downturn.
“What do Worker Flows Say about the Wage Gains from Unemployment Insurance,” joint with Stan Rabinovich [PDF available upon request]
Abstract: How large are the effects of unemployment insurance on re-employment wages? Search theory holds that UI increases accepted wages by making workers more selective about the jobs they accept. We show that the standard search model puts strong testable restrictions on the magnitude of this selectivity effect, given observed worker flows. A simple formula links the effect of UI on wages to its effect on job-finding hazard and to the size of frictional wage dispersion. Given the model-implied magnitude of the latter, the implied wage gain from UI cannot be very large. Our own empirical analysis using SIPP shows that, for high-wealth workers, the effects of UI on both duration and wages are close to zero, consistent with the model’s predictions. However, for liquidity-constrained workers, the estimated wage effect of UI is substantially larger than what a standard search model implies given its estimated effect on the job-finding hazard. We conclude that large estimated wage gains from UI are likely not due to selectivity alone.
“Wealth, Search, and Human Capital over the Business Cycle,” joint with Stan Rabinovich [PDF available upon request]
Abstract: We assess how an economy’s wealth distribution shapes its labor market dynamics. We answer this question in a quantitative model featuring directed search, incomplete markets, aggregate shocks, and endogenous on-the-job human capital accumulation. On the individual level, poorer workers apply for lower-wage jobs when unemployed and under-accumulate human capital when employed to self-insure against unemployment risk. These differences in behavior by wealth are intensified in recessions when jobs are scarce and unemployment risk is high. On the aggregate level, an economy entering a recession with more wealth dispersion suffers a greater reduction in human capital and hence more persistent earnings and output losses. We calibrate the model and use it to evaluate the importance of the wealth distribution for the impact of the Great Recession.
Note: Previously circulated under the title “Precautionary Search and Human Capital over the Business Cycle”
“Public Education Spending and Intergenerational Mobility”