Search Results
Working Paper
Pay for percentile
We propose an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions our scheme induces teachers to allocate socially optimal levels of effort to all students. Because this scheme employs only ordinal information, our scheme allows education authorities to employ completely new assessments at each testing date without ever having to equate various assessment forms. This approach removes incentives for teachers to teach to a particular assessment form and ...
Working Paper
The Shifting Reasons for Beveridge-Curve Shifts
We discuss how the relative importance of factors that contribute to movements of the U.S. Beveridge curve has changed from 1960 to 2023. We review these factors in the context of a simple flow analogy used to capture the main insights of search and matching theories of the labor market. Changes in inflow rates, related to demographics, accounted for Beveridge curve shifts between 1960 and 2000. A reduction in matching efficiency, that depressed unemployment outflows, shifted the curve outwards in the wake of the Great Recession. In contrast, the most recent shifts in the Beveridge curve ...
Working Paper
A Comment on Monetary Policy and Rational Asset Price Bubbles
Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising interest rates aggressively enough. This result is different from the Miao, Shen and Wang (2019) comment on Galí’s paper. They argue Galí’s model contains additional equilibria in which more aggressive rules dampen bubbles. We show that for these equilibria, more aggressive rules involve threats to raise interest rates more than actual rate increases.
Working Paper
Allocating Effort and Talent in Professional Labor Markets
In many professional service firms, new associates work long hours while competing in up-or-out promotion contests. Our model explores why these firms require young professionals to take on heavy work loads while simultaneously facing significant risks of dismissal. We argue that the productivity of skilled partners in professional service firms (e.g. law, consulting, investment banking and public accounting) is quite large relative to the productivity of their peers who are competent and experienced but not well-suited to the partner role. Therefore, these firms adopt personnel policies that ...
Working Paper
Information acquisition in financial markets: a correction
This note provides a proper example for the mechanism of strategic complementarities proposed in our paper. ; Original paper in Review of Economic Studies, January 2000, v. 67, no.1, p. 79?90.
Working Paper
The cost of business cycles under endogenous growth
In his famous 1987 monograph, Robert Lucas argued that further stabilizing the business cycles that persisted in the post-War era was pointless, because these cycles had a negligible effect on societal well-being. In particular, Lucas demonstrated that society should be willing to pay only a tiny fraction of its consumption expenditures per year to completely eliminate the fluctuations that prevailed over this period. This conclusion has been largely reaffirmed by subsequent studies, and has been commonly cited as evidence that policymakers should abstain from intervening to offset ...
Working Paper
Robustness and macroeconomic policy
This paper considers the design of macroeconomic policies in the face of uncertainty. In recent years, several economists have advocated that when policymakers are uncertain about the environment they face and find it difficult to assign precise probabilities to the alternative scenarios that may characterize this environment, they should design policies to be robust in the sense that they minimize the worstcase loss these policies could ever impose. I review and evaluate the objections cited by critics of this approach. I further argue that, contrary to what some have inferred, concern about ...
Working Paper
Characterizations in a random record model with a non-identically distributed initial record
We consider a sequence of random length M of independent absolutely continuous observations Xi, 1 = i = M, where M is geometric, X1 has cdf G, and Xi, i = 2, have cdf F. Let N be the number of upper records and Rn, n = 1, be the nth record value. We show that N is free of F if and only if G(x) = G0(F (x)) for some cdf G0 and that if E (|X2|) is finite so is E |Rn|) for n = 2 whenever N = n or N = n. We prove that the distribution of N along with appropriately chosen subsequences of E(Rn) characterize F and G, and along with subsequences of E Rn - Rn-1) characterize F and G up to a common ...
Working Paper
Estimating models of on-the-job search using record statistics
This paper proposes a methodology for estimating job search models that does not require either functional form assumptions or ruling out the presence of unobserved variation in worker ability. In particular, building on existing results from record- value theory, a branch of statistics that deals with the timing and magnitude of extreme values in sequences of random variables, I show how we can use wage data to identify the distribution from which workers search. Applying this insight to wage data in the NLSY dataset, I show that the data supports the hypothesis that the wage oer ...
Working Paper
Identification of search models with initial condition problems
This paper extends previous work on the identification of search models in which observed worker productivity is imperfectly observed. In particular, it establishes that these models remain identified even when employment histories are left-censored (i.e. we do not get to follow workers from their initial job out of unemployment), as well as when workers set different reservation wages from one another. We further show that allowing for heterogeneity in reservation can affect the empirical estimates we obtain, specifically estimates of the rate at which workers receive job offers.