Research

Abstract:  Using the Survey of Income and Program Participation, we confirm that the excess cyclically of new hire's wages is driven by wage changes for employed workers to transition rapidly between jobs.  We document two additional facts.  First, the same excess cyclically is present for workers who report making a job-to-job quit and who report having been involuntarily separated.  Second, the excess cyclically observed for rapid job-to-job movers is driven by workers for whom the new job is impermanent.  These two additional facts run contrary to the proposition that excess cyclical sensitivity of job-to-job movers' wages reveals cyclical labor productivity.  Using the same data, we estimate a Latent Markov Model which admits and identifies multiple continuing-match prone states that differ with respect to their concurrent employment report and propensity to exhibit and subsequent transitions.  Wages of individuals making employer-to-employer transitions from the match prone but unstably employed state exhibit nearly twice the excess cyclicality exhibited by individuals in the match prone and stability employed state.  Together the results suggest substantial procyclicality in the wages of new hires that is not accounted for by selection on match quality. 

Abstract:  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.  Using variation in state-level UI parameters recorded in state session laws over time and data from the Benefits Accuracy Measurement program and the Survey of Income and Program Participation, we test for and find a pattern of spillovers that cannot be neatly reconciled with workhorse or cutting-edge models of UI spillovers.  However, we show that the documented pattern conforms with the predictions of a standard model of wage posting with random search. Taken together, our results provide novel evidence of quantitatively- and policy-relevant information frictions in the market for the lowest paid and most cyclically sensitive labor.   Indeed, our estimates suggest that, in the typical US state, aggregate unemployment of insured individuals would decrease if the replacement rate were increased while holding the cap constant. 

Abstract:  Allocative wages—the labor costs considered when deciding to form or dissolve a long-term employment relationship—are more sensitive to cyclical conditions for more educated workers. Specifically, college educated workers exhibit an allocative wage that is highly pro-cyclical while high school dropouts exhibit no statistically discernible cyclical pattern. Further, as education increases, an increasing share of the sensitivity of allocative wages derives from persistent scarring effects of the cyclical position at the time of hiring on wages at higher tenures: amounting to more than a third for the college educated. Greater job stability of the more educated, and therefore exposure to scarring, accounts for only part of these differences. More significant scarring experienced by the more educated accounts for the remainder. In service of documenting these facts, I develop new methods for inferring the sensitivity of labor costs to shocks when wages are be intertemporally smoothed. 

Abstract: I document eight novel facts about wage changes and provide a theoretical framework to rationalize them.  I then illustrate how this new treatment of data and theoretical framework speak to important secular and cyclical features of the macroeconomy. The evidence put forth in this paper, suggests that a theory of wage setting in which wages respond to idiosyncratic competition is an important complement to the more conventional macroeconomic view in which wage rigidity is induced by deliberately divorcing the timing of wage changes from innovations in firms' and workers' opportunities. 

Abstract: We model inter-temporal asymmetries in the labor market as resulting from a strategic complementarity in firms' wage setting and workers' job search strategies. This strategic complementarity results in a continuum of possible equilibria and, assuming that no economic agent deviates from an existing strategy unless deviation is a unilateral best response, the model exhibits real rigidities leading to recoveries that can include both a "jobless" phase—in which productivity recovers while unemployment remains elevated—and a "wageless" phase—in which employment recovers but wages remain depressed. Using micro-data on unemployment duration from the current population survey, we estimate the parameters of the model via SGMM, decomposing recessions into a transitory and persistent component. Using this decomposition, we then interpret the relative timing of changes in market tightness and wage growth.

Abstract:  Delays in the provision of loans under Paycheck Protection Program due to the rapid exhaustion of initial funding caused large and persistent unemployment. We estimate that increasing the size of the initial PPP funding by 10 percent could have increased employment by over 2 million jobs through the summer of 2020 and more than 1 million jobs through the fall. The implied costs per job saved are low for a stimulus program, while our effect sizes are in line with recent estimates of the effects of payment timing and the costs of external financing for small businesses. In addition, the smallest firms were most likely to face delay and we find suggestive evidence that the costs of delay were more acute for workers in these firms and for the self-employed. Heterogeneous effects are consistent with these borrowers facing greater difficulty in obtaining alternative financing and suggests that a more targeted program could have achieved even greater efficacy. 

FEDS Working Paper 2021.003 Latest Draft (5/2023)  

* Previously circulated as "Ten Days Late and Billions of Dollars Short: The Employment Effects of Delays in Paycheck Protection Program Financing."

Abstract: I study a labor market in which identical workers search on- and off-the-job and heterogeneous firms employ using either an ex-ante postedposted wage or flexible wage contracts contingent on outside options. Firm level costs for contingent contracts generate a segmented equilibrium in which less productive firms post wages. The model with heterogeneous contracts can achieve wage dispersion, labor share, employment transitions, and flow value of unemployment that are simultaneously consistent with empirical observations while capturing information frictions and search externalities modeled by ex-ante wage posting. In contrast to well known results regarding pure wage posting models, a good t to these data can be achieved even when the vast majority of firms post wages. Matching to moments for the U.S. labor market in the 2010s implies roughly 58 percent of firms post wages and employ nearly 30 percent of workers under such contracts.