Statistical Discrimination and Duration Dependence in the Job Finding Rate (w/ Gregor Jarosch) [Paper]  - Review of Economic Studies

Coverage: Forbes 

This paper models a frictional labor market where employers endogenously discriminate against the long term unemployed. The estimated model replicates recent experimental evidence which documents that interview invitations for observationally equivalent workers fall sharply as unemployment duration progresses. We use the model to quantitatively assess the consequences of such employer behavior for job finding rates and long term unemployment and find only modest effects given the large decline in callbacks. Interviews lost to duration impact individual job-finding rates solely if they would have led to jobs. We show that such instances are rare when firms discriminate in anticipation of an ultimately unsuccessful application. Discrimination in callbacks is thus largely a response to dynamic selection, with limited consequences for structural duration dependence and long term unemployment.

Household Search and the Marital Wage Premium (w/ Shu Lin Wee)  [Paper] - AEJ Macroeconomics

We develop a model where selection into marriage and household search generate a marital wage premium. Beyond selection, married individuals earn higher wages for two reasons. First, income pooling within a joint household raises risk-averse individuals’ reservation wages. Second, married individuals climb the job ladder faster, as they internalize that higher wages increase their partner’s selectivity over offers. Specialization according to comparative advantage in search generates a premium that increases in spousal education, as in the data. Quantitatively, household search explains 16-41% and 20-68% of the premium for males and females respectively, and accounts for its increase with spousal education.

Which Workers Bear the Burden of Social Distancing Policies? (with Simon Mongey and Alex Weinberg) [Paper] [NBER WP] [Replication Files] - Journal of Economic Inequality

Coverage: FiveThirtyEight, NYT, Reuters

What are the characteristics of workers in jobs likely to be initially affected by broad social distancing and later by narrower policy tailored to jobs with low risk of disease transmission? We use O*NET to construct a measure of the likelihood that jobs can be conducted from home (a variant of Dingel and Neiman (2020)) and a measure of low physical proximity to others at work. We validate the measures by showing how they relate to similar measures constructed using time use data from ATUS. Our main finding is that workers in low-work-from-home or high-physical-proximity jobs are more economically vulnerable across various measures constructed from the CPS and PSID: they are less educated, of lower income, have fewer liquid assets relative to income, and are more likely renters. We further substantiate the measures with behavior during the epidemic. First, we show that MSAs with less pre-virus employment in work-from-home jobs experienced smaller declines in the incidence of `staying-at-home', as measured using SafeGraph cell phone data. Second, we show that both occupations and types of workers predicted to be employed in low work-from-home jobs experienced greater declines in employment according to the March 2020 CPS. For example, non-college educated workers experienced a 4ppt larger decline in employment relative to those with a college degree.

Comment on "From Mancession to Shecession: Women's Employment in Regular and Pandemic Recessions [Paper] - NBER Macroeconomics Annual 2021, volume 36

Gender Differences in Job Search Behavior and the Gender Earnings Gap: Evidence from the Field and the Lab (with Patricia Cortes, Jessica Pan, Ernesto Rueben, and Basit Zafar) [Draft] Quarterly Journal of Economic

This paper investigates gender differences in the job search process, both in the field and lab. First, we collect rich information on job offers and acceptances from undergraduates of Boston University’s Questrom School of Business. We document two novel empirical facts: (1) there is a clear gender difference in the timing of job offer acceptance, with women accepting jobs substantially earlier than men, and (2) the gender earnings gap in accepted offers narrows in favor of women over the course of the job search period. To rationalize these patterns, we develop a job search model that incorporates gender differences in risk aversion and overoptimism about prospective offers. We validate the model assumptions and predictions using the survey data, and present empirical evidence that the job search patterns in the field can be partly explained by greater risk aversion displayed by women and the higher levels of overoptimism (and slower belief updating) displayed by men. Next, we replicate the findings from the field in a specially-designed laboratory experiment that features sequential job search, and provide direct evidence on the purported mechanisms. Our findings highlight the importance of risk preferences and beliefs for gender differences in job-finding behavior, and consequently, early career wage gaps among the highly-skilled.

Approximating Grouped Fixed Effects Estimation via Fuzzy Clustering Regression (with Daniel Lewis, Davide Melcangi, and Aidan Toner-Rogers) [Draft], Journal of Applied Econometrics

We propose a new, computationally efficient way to approximate the “grouped fixed-effects” (GFE) estimator of Bonhomme and Manresa (2015), which estimates grouped patterns of unobserved heterogeneity. To do so, we generalize the fuzzy C-means objective to regression settings. As the regularization parameter m approaches 1, the fuzzy clustering objective converges to the GFE objective; moreover, we recast this objective as a standard Generalized Method of Moments problem. We replicate the empirical results of Bonhomme and Manresa (2015) and show that our estimator delivers almost identical estimates. In simulations, we show that our approach delivers improvements in terms of bias, classification accuracy and computational speed.

Working Papers:

Latent Heterogeneity in the Marginal Propensity to Consume (with Daniel Lewis and Davide Melcangi) [Draft] [Supplemental Appendix], R&R, Review of Economic Studies

We estimate the unconditional distribution of marginal propensities to consume (MPC) using clustering regression applied to the 2008 economic stimulus payments. By deviating from the standard approach of estimating MPC heterogeneity using interactions with observables, we can recover the full distribution of MPCs. We find households spent at least 8% of the rebate, and individual households used rebates for different goods. While many observables correlate individually with our estimated MPCs, these relationships disappear when tested jointly, except for income and the average propensity to consume. Household observables explain only 8% of MPC variation, highlighting the role of latent heterogeneity.

Assortative Matching and Household Income Inequality: A Structural Approach (w/ Shu Lin Wee) [Draft]

We develop a model of educational investment, marriage, and household labor market search to quantify how changes in incentives to positively sort in marriage - summarized by changes in marital surplus - contributed to the rise in U.S. household income inequality. While there are always positive incentives to sort by skill and education, the former strengthened relative to the latter over time. These changes incentivized further educational attainment, especially for the high skilled. Unlike findings from previous studies, the resulting increase in like-education-skill marriages contributed to a significant rise in income equality.

Sectoral Shocks and Move Unemployment [new draft coming soon]  (previously circulated under "A Multisector Equilibrium Search Model of Labor Reallocation")

This paper develops a multisector search model in which workers choose their sectors in response to sector-specific and idiosyncratic shocks. Unemployed workers can search for work in their sector of last employment, or become ``move unemployed,'' spending extra time in unemployment to reach a new sector. Sectoral shocks induce net movements of labor into relatively productive sectors, while idiosyncratic worker shocks ensure that gross intersectoral flows through unemployment are always positive, a prediction consistent with the data. I use the model to test the sectoral shifts hypothesis (Lilien (1982)) in the context of the Great Recession in which the construction sector experienced a relatively large shock. In a two-sector calibration of the model to construction and non-construction, I find that sectoral dispersion shocks have no impact on aggregate unemployment. While they increase net mobility, this increase is accomplished through a change in the composition of gross flows rather than their level. The results suggest that, a priori, we should not expect sectoral shocks to generate unemployment fluctuations. 

Labor Market Search with Imperfect Information and Learning (with John Conlon, Basit Zafar, and Matthew Wiswall) [Draft]

We investigate the role of information frictions in the US labor market using a new nationally representative panel dataset on individuals' labor market expectations and realizations. We find that expectations about future job offers are, on average, highly predictive of actual outcomes. Despite their predictive power, however, deviations of ex post realizations from ex ante expectations are often sizable. The panel aspect of the data allows us to study how individuals update their labor market expectations in response to such shocks. We find a strong response: an individual who receives a job offer one dollar above her expectation subsequently adjusts her expectations upward by $0.47. We embed the empirical evidence on expectations and learning into a model of search on- and off- the job with learning, and show that it is far better able to fit the data on reservation wages relative to a model that assumes complete information. We use the framework to gauge the welfare costs of information frictions which arise because individuals make uninformed job acceptance decisions and find that the costs due to information frictions are sizable, but mitigated by the presence of learning.

Job Search, Wages, and Inflation [Draft] (with Jane Ryngaert)

How do inflation expectations and inflation affect the job search behavior of workers, given that wages are typically set in nominal terms? Using pre-COVID data from the Survey of Consumer Expectations, we show that employed workers who expect higher inflation are more likely to search for jobs and are subsequently more likely to have a job-to-job transition over the short term. This behavior is consistent with the idea that people look for new jobs with higher real earnings, anticipating that real earnings at their current job will fall with inflation. We validate this hypothesis using new survey data collected via the Real Time Population Survey that asks individuals how their (i) current

nominal earnings and (ii) search behavior would respond under various inflation scenarios. We then develop a model which can replicate these patterns, and use the model to study the partial equilibrium passthrough of shocks to inflation and inflation expectations to wages. We demonstrate that even short run increases in inflation expectations can affect job-to-job transitions via search on-the-job, and that the effects are larger at the lower end of the wage distribution. Together, the findings suggest that inflation dynamics may have played a role in generating the observed post-Covid wage compression.


Stimulus and Insurance: The Marginal Propensity to Discharge Debt [Draft] (with Gizem Kosar, Davide Melcangi & David Wiczer)

Using detailed micro data, we document that households often use "stimulus" checks to pay down debt, especially those with low net wealth-to-income ratios. To rationalize these facts, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because interest rates rise with debt, borrowers have increasingly larger incentives to use an additional dollar to reduce debt service payments rather than consume. Using our calibrated model, we then study how this marginal propensity to

repay debt (MPRD) alters the aggregate implications of fiscal transfers. We uncover a trade-off between stimulus and insurance, as high-debt individuals gain considerably from transfers, but consume relatively little immediately. We show how this mechanism can lower short-run fiscal multipliers, but sustain aggregate consumption for longer.

Job Search, Raises, and Inflation [Draft] (with Jane Ryngaert and Jesse Wedewer)

How does inflation transmit to changes in nominal wages?  We propose a model of on-the-job search in which wages are negotiated in nominal terms and fixed for the duration of the match or until one party has a credible threat to renegotiate.  In the model with an exogenous search decision, inflationary shocks accelerate the rate of on-the-job wage negotiations. When search is allowed to increase endogenously in response to inflation, the rate of job-to-job transitions and counteroffers accelerate simultaneously.  This implies that inflationary shocks generate both productive and inflationary wage changes.

Work In Progress:

Partial Insurance with Advanced Information: Evidence from Income and Consumption Expectations (with Noah Kwicklis and Fatih Karahan)

Wage Growth and Compensating Differentials: Evidence from the SCE (with Gizem Kosar, Basit Zafar, and Matthew Wiswall


Discussion of "On Worker and Firm Heterogeneity in Wages and Employment Mobility: Evidence from Danish Register Data," by Lentz, Piyapromdee, and Robin

Discussion of "The Consequences of Long-Term Unemployment: Evidence from Matched Employer-Employee Data," by Abraham, Haltiwanger, Sandusky, and Spletzer

Discussion of "Secular Labor Reallocation and Business Cycles," by Chodorow-Reich and Wieland

Discussion of "Search, Matching, and Training" by Flinn, Gemici, and Laufer

Discussion of "Marriage, Labor Supply, and Home Production" by Gousse, Jacquemet, and Robin

Discussion of "How Sticky Wages in Existing Jobs Can Affect Hiring," by Bils, Chang, and Kim 

Upcoming Seminars/Presentations:

FRB Minneapolis 10/2/2023-10/6/2023

Richmond Fed-UVA-Duke Workshop 10/19/2023-10/20/2023

FRB Richmond 10/30/2023-11/1/2023

Philadelphia Workshop on Macroeconomics and Economic Policy 11/2/2023-11/3/2023

Boston University 11/16/2023


SIPP one-click download on GitHub: code which scrapes all the SIPP files from NBER and merges 1990-present panels

- for public use: please email us with any comments or issues

Sample code for Parallel computation in Matlab which calls Dynare