Search Results
Working Paper
Tariffs and Goods-Market Search Frictions
We study uniform tariffs in a general equilibrium dynamic model with search frictions between heterogeneous exporting producers and importing retailers. We analytically characterize unilateral import tariffs that maximize domestic welfare. Search frictions lower these tariffs because of market thickness effects, which reinforce aggregate production nonconvexities. A calibration using 2016 U.S. and Chinese data suggests that optimal U.S. unilateral and Nash equilibrium tariffs with baseline search frictions are 10 ppt. below those in a model with reduced search frictions. Changes in welfare in ...
Working Paper
Deadlines and Matching
Deadlines and fixed end dates are pervasive in matching markets including school choice, the market for new graduates, and even financial markets such as the market for federal funds. Deadlines drive fundamental non-stationarity and complexity in behavior, generating significant departures from the steady-state equilibria usually studied in the search and matching literature. I consider a two-sided matching market with search frictions where vertically differentiated agents attempt to form bilateral matches before a deadline. I give conditions for existence and uniqueness of equilibria, and ...
Working Paper
A theory of targeted search
We present a theory of targeted search, where people with a finite information processing capacity search for a match. Our theory explicitly accounts for both the quantity and the quality of matches. It delivers a unique equilibrium that resides in between the random matching and the directed search outcomes. The equilibrium that emerges from this middle ground is inefficient relative to the constrained Pareto allocation. Our theory encompasses the outcomes of the random matching and the directed search literature as limiting cases.
Report
Trade dynamics in the market for federal funds
We use minute-by-minute daily transaction-level payments data to document the cross-sectional and time-series behavior of the estimated prices and quantities negotiated by commercial banks in the interbank market. We study the frequency and volume of trade, the size distribution of loans, the distribution of bilateral rates, and the intraday dynamics of the reserve balances held by commercial banks. We find evidence of the importance of the liquidity provision achieved by commercial banks that act as de facto intermediaries of funds.
Report
Firm Dynamics and Random Search over the Business Cycle
I build a tractable random search model with firm dynamics, on-the-job search, and aggregate shocks. Multi-worker firms make recruitment decisions, choose whether to enter or exit the market, and design wage contracts. Tractability is obtained by showing that, under a set of assumptions on the recruitment technology, the decisions of workers and firms depend on the firms’ current productivity. I confront the model to salient business cycle moments on the reallocation of workers across the firm productivity distribution derived from firm-level data that the model successfully replicates. I ...
Working Paper
Firms as Learning Environments: Implications for Earnings Dynamics and Job Search
This paper demonstrates that heterogeneity in firms’ promotion of human capital accumulation is an important determinant of life-cycle earnings inequality. I use administrative micro data from Germany to show that different establishments offer systematically different earnings growth rates for their workers. This observation suggests that that the increase in inequality over the life cycle reflects not only inherent worker variation, but also differences in the firms that workers happen to match with over their lifetimes. To quantify this channel, I develop a life-cycle search model with ...
Working Paper
Job Ladders and Earnings of Displaced Workers
Workers who suffer job displacement experience surprisingly large and persistent earnings losses. This paper proposes an explanation for this robust empirical puzzle in a model of search over match-quality with a significant job ladder. In addition to capturing the depth and persistence of displaced-worker-earnings losses, the model is able to match a) separation rates by tenure; b) the empirical decomposition of earnings losses into reduced wages and employment; c) observed wage dispersion; d) the pattern of employer-to-employer transitions after layoff, and e) the degree of serial ...
Working Paper
Using the Eye of the Storm to Predict the Wave of Covid-19 UI Claims
We leverage an event-study research design focused on the seven costliest hurricanes to hit the US mainland since 2004 to identify the elasticity of unemployment insurance filings with respect to search intensity. Applying our elasticity estimate to the state-level Google Trends indexes for the topic “unemployment,” we show that out-of-sample forecasts made ahead of the official data releases for March 21 and 28 predicted to a large degree the extent of the Covid-19 related surge in the demand for unemployment insurance. In addition, we provide a robust assessment of the uncertainty ...
Report
The over-the-counter theory of the fed funds market: a primer
We present a dynamic over-the-counter model of the fed funds market, and use it to study the determination of the fed funds rate, the volume of loans traded, and the intraday evolution of the distribution of reserve balances across banks. We also investigate the implications of changes in the market structure, as well as the effects of central bank policy instruments such as open market operations, the Discount Window lending rate, and the interest rate on bank reserves.
Discussion Paper
When Do Trade Frictions Increase Liquidity?
Economists tend to assume that frictions that limit trading in financial markets reduce liquidity and lower investor welfare. In this blog I discuss a recent staff study of mine that challenges that conventional wisdom. I explain how introducing trading frictions—such as circuit breakers—that slow or halt trading in an over-the-counter market experiencing a fire sale might, paradoxically, lead to higher liquidity and investor welfare.