Unemployment Insurance during a Pandemic
The CARES Act implemented in response to the COVID-19 crisis dramatically increases the generosity of unemployment insurance (UI) benefits, triggering concerns about its substantial impact on unemployment. This paper combines a labor market search-matching model with the SIR-type infection dynamics to study the effects of CARES UI on both unemployment and infection. More generous UI policies create work disincentives and lead to higher unemployment, but they also reduce infection and save lives. Economic shutdown policies further amplify these effects of UI policies. Quantitatively, the CARES ...
Human capital dynamics and the U.S. labor market
Labor Market Institutions and the Effects of Financial Openness
We propose a new channel to explain why developing countries may fail to beneﬁt from ﬁnancial globalization, based on labor market institutions. In our model, ﬁnancial openness in a developing country with a rigid labor market leads to capital outﬂow, and both employment and output fall. In contrast, ﬁnancial openness in a developing country with a ﬂexible labor market beneﬁts the country. Our model suggests that enhancing labor market ﬂexibility is a complementary reform for developing countries opening capital accounts.
Sticky information diffusion and the inertial behavior of durable consumption
A leading theory of consumption behavior is that consumers choose their consumption based only on their expected total lifetime income. This theory is called the permanent income hypothesis. According to this theory, consumers should adjust their consumption if they experience a change that affects their expected lifetime income, such as through an unexpected change in employment that affects their expected earnings going forward. One challenge for this theory is that the empirical evidence on consumer spending decisions for durable and nondurable goods does not match the implications of this ...
Implications of recent U.S. energy trends for trade forecasts
The development of hydraulic fracturing and horizontal drilling has brought significant structural change to the energy sector, increasing energy production and decreasing net energy imports. Future changes in energy policy or technology could have even larger effects on energy exports and thus overall exports. As a result, distinguishing energy from non-energy components of trade becomes important for forecasts in both the near and longer term. Craig S. Hakkio and Jun Nie introduce models separating energy from the non-energy components of trade to examine how changes in energy production ...
Training or search? evidence and an equilibrium model
Training programs are a major tool of labor market policies in OECD countries. I use a unique panel data set on the labor market experience of individual German workers between 2000 and 2002 to estimate a dynamic model of search and training, which allows me to quantify the impact of training programs and unemployment benefits on employment, unemployment, output, and the government expenditures. ; The model extends Ljungqvist and Sargent (JPE, 1998) by incorporating a training decision and a broader menu of unemployment benefits. Government-sponsored training programs feature a key trade-off ...
Economic growth in foreign regions and U.S. export growth
U.S. export growth depends crucially on foreign demand. Lower foreign economic growth is associated with lower U.S. export growth. And recently, some parts of the world, particularly Asia and Europe, have shown signs of slowing growth. ; Disaggregating historical data by region, authors Nie and Taylor measure the changes in U.S. export growth associated with changes in different regions' economic growth. They find the change in U.S. export growth associated with change in a given foreign region's growth depends both on the size of the region's economy and on the share of U.S. exports destined ...
The effect of the U.S. energy boom on the trade deficit
Craig S. Hakkio and Jun Nie predict the real energy trade deficit will decline at a much slower pace in 2015 than in the past few years.
Forecasting U.S. Economic Growth in Downturns Using Cross-Country Data
To examine whether including economic data on other countries could improve the forecast of U.S. GDP growth, we construct a large data set of 77 countries representing over 90 percent of global GDP. Our benchmark model is a dynamic factor model using U.S. data only, which we extend to include data from other countries. We show that using cross-country data produces more accurate forecasts during the global financial crisis period. Based on the latest vintage data on August 6, 2020, the benchmark model forecasts U.S. real GDP growth in 2020:Q3 to be −6.9 percent (year-over-year rate) or 14.9 ...
Unemployment Insurance during a Pandemic
The CARES Act implemented in response to the COVID-19 crisis dramatically increases the generosity of unemployment insurance (UI) benefits, triggering concerns about its substantial impact on unemployment. This paper combines a labor market search-matching model with the SIR-type infection dynamics to study the effects of CARES UI on both unemployment and infection. More generous UI policies create work disincentives and lead to higher unemployment, but they also reduce infection and save lives. Shutdown policies and infection risk further amplify these effects of UI policies. Quantitatively, ...