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Jel Classification:E24 

Working Paper
Which Output Gap Estimates Are Stable in Real Time and Why?

Output gaps that are estimated in real time can differ substantially from those estimated after the fact. We aim to understand the real-time instability of output gap estimates by comparing a suite of reduced-form models. We propose a new statistical decomposition and find that including a Okun’s law relationship improves real-time stability by alleviating the end-point problem. Models that include the unemployment rate also produce output gaps with relevant economic content. However, we find that no model of the output gap is clearly superior to the others along each metric we consider.
Finance and Economics Discussion Series , Paper 2020-102

Working Paper
Bad Jobs and Low Inflation

We study a model in which firms compete to retain and attract workers searching on the job. A drop in the rate of on-the-job search makes such wage competition less likely, reducing expected labor costs and lowering inflation. This model explains why inflation has remained subdued over the last decade, which is a conundrum for general equilibrium models and Phillips curves. Key to this success is the observed slowdown in the recovery of the employment-to-employment transition rate in the last five years, which is interpreted by the model as a decline in the share of employed workers searching ...
Working Paper Series , Paper WP 2020-09

Working Paper
Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity

We document considerable scope of heterogeneity within the unemployed, especially when the unemployed are divided along eligibility and receipt of unemployment insurance (UI). We study the implications of this heterogeneity on UI’s insurance-incentive trade-off using a heterogeneous-agent job-search model capable of matching the wealth and income differences that distinguish UI recipients from non-recipients. Insurance benefits are larger for UI recipients who are predominantly wealth-poor. Meanwhile, incentive costs are nonmonotonic in wealth because the poorest individuals, who value ...
Working Papers , Paper 2019-022

Working Paper
The Rise and Fall of Consumption in the 2000s

U.S. consumption has gone through steep ups and downs since the turn of the millennium, but the causes of these fluctuations are still imperfectly identified. We quantify the relative impact on consumption growth of income, unemployment, house prices, credit scores, debt, expectations, foreclosures, inequality, and refinancings for four subperiods: the ?dot-com recession? (2001-2003), the ?subprime boom? (2004-2006), the Great Recession (2007-2009), and the ?tepid recovery? (2010-2012). We document that the explanatory power of different factors varies by subperiods, implying that a ...
Working Papers (Old Series) , Paper 1507

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 Papers , Paper 15-29

Journal Article
Who Should Work from Home During a Pandemic? The Wage-Infection Trade-off

Shutting down the workplace is an effective means of reducing contagion but can induce large economic losses. We harmonize the American Time Use Survey and O*NET data to construct a measure of infection risk (exposure index) and a measure of the ease with which a job can be performed remotely (work-from-home index) across both industries and occupations. The two indexes are negatively correlated but distinct, so the economic costs of containing a pandemic can be minimized by sending home only those workers that are highly exposed to infection risk but that can perform their jobs easily from ...
Review , Volume 104 , Issue 2 , Pages 92-109

Report
Job search behavior over the business cycle

We create a novel measure of job search effort starting in 1994 by exploiting the overlap between the Current Population Survey and the American Time Use Survey. We examine the cyclical behavior of aggregate job search effort using time series and cross-state variation and find that it is countercyclical. About half of the countercyclical movement is explained by a cyclical shift in the observable characteristics of the unemployed. Individual responses to labor market conditions and drops in wealth are important in explaining the remaining variation.
Staff Reports , Paper 689

Report
Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job Ladder Risk vs. Human Capital

We study the determinants of lifetime earnings (LE) inequality in the United States, for which differences in lifetime earnings growth are key. Using administrative data and focusing on the roles of job ladder dynamics and on-the-job learning, we document that 1) lower LE workers change jobs more often, mainly driven by higher nonemployment; 2) earnings growth for job stayers is similar at around 2 percent in the bottom two-thirds of the LE distribution, whereas for job switchers it rises with LE; and 3) top LE workers enjoy high earnings growth regardless of job switching. We estimate a job ...
Staff Reports , Paper 908

Report
Population Aging and the US Labor Force Participation Rate

The labor force participation rate dropped sharply at the beginning of the pandemic, and as of November 2021 it had recovered only about half of its lost ground. The failure of the participation rate to get closer to its level immediately before the pandemic has puzzled many analysts. In this note, we show that the current participation rate is much less puzzling if one compares it with participation in November 2017 (the last time the unemployment rate was at its current level of 4.2 percent), rather than February 2020 (immediately before the pandemic). Since November 2017, population aging ...
Current Policy Perspectives

Working Paper
The Baby Boomers and the Productivity Slowdown

The entry of baby boomers into the labor market in the 1970s slowed growth for physical and human capital per worker because young workers have little of both. Thus, the baby boom could have contributed to the 1970s productivity slowdown. I build and calibrate a model a la Huggett et al. (2011) with exogenous population and TFP to evaluate this theory. The baby boom accounts for 75% of the slowdown in the period 1964-69, 25% in 1970-74 and 2% in 1975-79. The retiring of baby boomers may cause a 2.8pp decline in productivity growth between 2020 and 2040, ceteris paribus.
Working Papers , Paper 2018-37

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