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Working Paper
These Caps Spilleth Over: Equilibrium Effects of Unemployment Insurance
The design of US unemployment insurance (UI) policy--which features benefits assigned as a percentage of past wages up to a cap--engenders tests for spillovers from policy variation to workers who are not directly treated. We test for and find a pattern of spillovers from state-level UI policy changes that cannot be neatly reconciled with workhorse or cutting-edge models of UI spillovers. Instead, we show that the documented pattern conforms with the predictions of a canonical model of information frictions: wage posting with random search. Taken together, our results provide novel evidence ...
Briefing
When Should Employees Be Suspended Instead of Fired?
The economic theory of incentives explains why a worker who consistently underperforms must be fired. To respond to incentives, the worker must maintain a stake in the relationship with the employer. When the worker's stake runs out, the relationship must terminate. This article reviews recent research showing that this explanation is oversimplified. A temporary suspension of the worker is usually sufficient to rebuild the worker's stake, which allows the productive relationship to resume without terminating. The costs and benefits of suspending the worker, however, can be highly sensitive to ...