Search Results
Working Paper
The Implications of Labor Market Heterogeneity for Unemployment Insurance Design
We estimate unemployment insurance (UI) eligibility, take-up, and replacement rates at the individual level and document how they vary with earnings, wealth, and unemployment duration. We extend a widely used framework that combines an incomplete-markets model with a frictional labor market to match our findings. We show that the optimal UI policy becomes substantially more generous. The gap between optimal policies in the two models is largely driven by endogenous UI take-up, which entails a utility cost: only those who value UI the most choose to take it. The welfare gains from insuring ...
Working Paper
Spousal Labor Supply Response to Job Displacement and Implications for Optimal Transfers
I document a small spousal earnings response to the job displacement of the family head. The response is even smaller in recessions, when earnings losses are larger and additional insurance is valuable. Using cross-state differences in transfer generosity, I find that generous transfers substantially crowd out the spousal earnings response. To study its policy implications, I develop an incomplete markets model with family labor supply and aggregate fluctuations, where predicted labor supply elasticities to taxes and transfers are in line with empirical estimates both in aggregate and across ...
Working Paper
Enhanced Unemployment Insurance Benefits in the United States during COVID-19: Equity and Efficiency
We assess the effects of the historically unprecedented expansion of U.S. unemployment insurance (UI) payments during the COVID-19 pandemic. The adverse economic impacts of the pandemic, notably the pattern of job losses and earnings reductions, were disproportionately born by lower-income individuals. Focusing on household income as a broad measure of well-being, we document that UI payments almost completely offset the increase in household income inequality that otherwise would have occurred in 2020 and 2021. We also examine the impacts of the $600 increase in weekly UI benefit payments, ...
Working Paper
Spousal Labor Supply Response to Job Displacement and Implications for Optimal Transfers
I document a limited spousal earnings response to job displacement of the family head. Using cross-state differences in transfers, I show that the main reason behind this finding is the crowding-out effects of transfers. To study the implications of this interaction between public and private insurance, I develop an incomplete markets model with a frictional labor market, family labor supply, and aggregate shocks. The optimal policy prescribes less generous means-tested and more generous employment-tested transfers, whereas current U.S. policy offers the opposite. The optimal policy mix ...
Working Paper
Enhanced Unemployment Insurance Benefits in the United States during COVID-19: Equity and Efficiency
We assess the effects of the historically unprecedented expansion of U.S. unemployment insurance (UI) payments during the COVID-19 pandemic. The adverse economic impacts of the pandemic, notably the pattern of job losses and earnings reductions, were disproportionately born by lower-income individuals. Focusing on household income as a broad measure of well-being, we document that UI payments almost completely offset the increase in household income inequality that otherwise would have occurred in 2020 and 2021. We also examine the impacts of the $600 increase in weekly UI benefit payments, ...
Discussion Paper
How Do People Find Jobs?
Most people find themselves looking for work at some point in their adult lives. But what brings employers and job seekers together? And does searching for a new job while unemployed lead to different outcomes than searching while employed? Little is known about the job search process for unemployed workers. Even less is known about the search process and outcomes for currently employed workers?so?called ?on?the?job? search. This Liberty Street Economics post aims to shed light on these questions and to draw some conclusions for our understanding of labor market dynamics more generally.
Report
Labor Market Policies during an Epidemic
We study the positive and normative implications of labor market policies that counteract the economic fallout from containment measures during an epidemic. We incorporate a standard epidemiological model into an equilibrium search model of the labor market to compare unemployment insurance (UI) expansions and payroll subsidies. In isolation, payroll subsidies that preserve match capital and enable a swift economic recovery are preferred over a cost-equivalent UI expansion. When considered jointly, however, a cost-equivalent optimal mix allocates 20 percent of the budget to payroll subsidies ...
Working Paper
Labor Market Shocks and Monetary Policy
We develop a heterogeneous agent New Keynesian model featuring a frictional labor market with on-the-job search to quantitatively study the positive and normative implications of employer-to-employer (EE) transitions for macroeconomic outcomes and monetary policy. We find that EE dynamics played an important role in shaping inflation dynamics during the Great Recession and COVID-19 recoveries, with the former exhibiting subdued EE transitions and inflation despite both episodes sharing similar unemployment dynamics. Optimal monetary policy prescribes a strong positive response to EE ...
Working Paper
Labor Market Shocks and Monetary Policy
We develop a heterogeneous-agent New Keynesian model with a frictional labor market and on-the-job search to study how employer-to-employer (EE) transitions affect macroeconomic outcomes and monetary policy. We find that EE dynamics significantly shaped inflation during the Great Recession and COVID-19 recoveries. Despite similar unemployment paths, the former experienced weaker EE transitions and lower inflation. Optimal monetary policy prescribes a strong positive response to EE fluctuations, implying central banks should distinguish between episodes with similar unemployment but different ...
Working Paper
The Implications of Labor Market Heterogeneity on Unemployment Insurance Design
We digitize state-level and time-varying unemployment insurance (UI) laws on initial eligibility, payment amount, and payment duration and combine them with microdata on labor market outcomes to estimate UI eligibility, take-up, and replacement rates at the individual level. We document how levels of income and wealth affect unemployment risk, eligibility,take-up, and replacement rates both upon job loss and over the course of unemployment spells. We evaluate whether these empirical findings are important for shaping UI policy design using a general equilibrium incomplete markets model ...