- On the effects of Ranking by Unemployment Duration (joint with Edgar Preugschat) (submitted)
(This version: March, 2017)We propose a theory based on the firm's hiring behavior that rationalizes the observed decline of callback rates for an interview, exit rates, and reemployment wages over unemployment duration. We build a directed search model with symmetric incomplete information on worker types and non-sequential search by firms. Sorting due to firms' screening of applicants in the past makes expected productivity fall with unemployment duration, which induces firms to rank applicants by duration. The labor market is non-segmented in equilibrium because firms find it optimal to attract all workers, which ensures that callback and exit rates both fall with duration. Furthermore, we conduct a numerical exercise to show that our model can replicate quite well the observed falling patterns, and that the effects of the firm's ranking decision can be sizable.
- Worker Turnover and Unemployment Insurance (joint with Sekyu Choi) (Resubmitted to The International Economic Review) NEW DRAFT
This paper studies a competitive search model of the labor market with learning about match-specific productivity in which risk-averse workers factor present and future unemployment risks in their search decisions. We examine internally efficient equilibrium allocations in which match termination occurs only if the joint value of a worker-firm pair is negative. We show that internal efficiency poses a trade-off between present and future unemployment risks: low-wage jobs are easier to get, but also shorter lived. Policies that target the lack of insurance against unemployment risks also affect such a trade-off, and, hence, equilibrium worker turnover
and job composition. In addition to a publicly-provided insurance against these risks, the implementation of the planner’s allocation requires a negative income tax to subsidize wages and a zero layoff tax. According to our numerical experiments, unemployment benefits are excessively high in the U.S. economy, which affects hiring and separation rates.
- Unemployment Risks and Intra-Household Insurance
We study the constrained efficient intra-household insurance and what unemployment risks should be publicly insured in an economy with incomplete markets and intra-household risk sharing, where households are formed by a job-seeker and an employed spouse and differ by the productivity of the spouse. Unlike the spouse's total income, neither her productivity nor labor supply is observed. We characterize the directed search equilibrium, and show that the spouse's labor supply is negatively affected by unemployment benefits regardless of the search outcome of the worker in line with the empirical evidence. We show that the optimal unemployment benefits are contingent on the household's total income as it affects the trade-off between consumption-smoothing and job search incentives. We numerically explore the welfare gains of implementing a household-income-based unemployment insurance.
Work in Progress
A Search Model of the Creation and Dynamics of International Trade Partnerships, with Claustre Bajona
- Intermediation in the Housing Market
- Effects of Switching Occupations along the Job Search
- Untitled, with Hernán Seoane
- A Note on U.S. Worker Turnover (joint with Sekyu Choi) (accepted by The Oxford Bulletin of Economics and Statistics)
- Unobserved Heterogeneity, Exit Rates and Re-employment Wages (joint with Pedro Gomes) (accepted at The Scandinavian Journal of Economics)