Research
Job Market Paper
Administrative data show that, on average, 22% of unemployment insurance (UI) applications were rejected before the pandemic due to applicants’ failure to meet the eligibility requirements. I found that the uncertainty within the eligibility determination process is critical to explain this high rejection rate of UI. This paper takes into account this uncertainty and uses an equilibrium search model to quantify the effects of relaxing UI eligibility requirements on heterogeneous workers under two policy regimes: prior to (around 2018) and during the pandemic recession (in 2020). Within both policy regimes, I compare such UI expansion that relaxed the requirement with more common UI extensions, such as increasing the amount or duration of the benefits. I show that the effect of UI expansion on increasing take-up rate is five times higher than other UI extensions. Moreover, I find that UI expansion has a significant positive distributional effect, especially on low earners who experience high unemployment risk and have less ability to self-insure but are also most likely to be rejected due to past earning requirements. I then use the model to decompose and compare the effects of a whole suite of programs introduced in the pandemic recession, the CARES Act, which includes standard prolonged duration, increased payments, and, for the first time, an expansion of eligibility. I find that this UI expansion, the Pandemic Unemployment Assistance (PUA), is the most crucial policy adjustment. In addition, beneficiaries of PUA mostly have lower earnings. Lastly, I use the model to find the optimal duration of the CARES Act, given the start date. I find that ending benefits at 52 weeks provides the highest increase in welfare per dollar of spending.
Working Papers:
with David Wiczer, Ben Griffy (2021) Presentation slides (draft available upon request)
In the U.S., workers whose past earnings were below a threshold are ineligible to receive unemployment insurance (UI). This creates a discontinuous jump in their value of unemployment should they separate. We exploit this jump with a regression discontinuity design using administrative panel data on earnings to estimate the effect of UI receipt on earnings. We find a sizable local effect from UI eligibility on earnings in the next employer, around $300 or roughly 10% of quarterly earnings. However, this understates the causal effect of UI receipt, because not every unemployed worker claims UI. We present an equilibrium directed search model that relates the reduced form estimates to causal effects on welfare, earnings and unemployment duration.
“Labor Supply Flexibility and Portfolio Decisions: An Empirical Analysis.” (draft available upon request)
with Hugo Benitez-Silva (2020). Revision requested, Journal of Applied Econometrics.
This paper uses panel data from the Health and Retirement Study to estimate the relationship between measures of labor supply flexibility and portfolio-choice decisions by utility-maximizing individuals. Seminal research on portfolio decisions over the life-cycle, and recent research on stochastic dynamic programming models with endogenous labor supply and savings decisions suggest that, other things equal, individuals with more labor supply flexibility are likely to invest more in risky assets, regardless of their age, because of the insurance component that flexible labor supply provides. After controlling for panel sample selection and unobserved heterogeneity I find that labor supply flexibility leads to holding between 12% and 14% more wealth in stocks.
"Recovery from Mobility Limitations among Older Americans: The First-Interview Effect"
with Hugo Benitez-Silva, Yaunyuan Deng (2021) Poster (draft available upon request)
Mobility limitations can affect an individual’s health, access to health care, labor supply, application to social insurance programs, and pension claiming decisions. Measures of mobility limitations (even self-reported ones) have been considered as objective measures of health status and few concerns have been raised about their potential biases. Using data from the Health and Retirement Study, we observe that the incidence of recoveries from mobility limitations is very high between the first and second time that individuals are interviewed, and declines sharply to a stable level in subsequent waves. Based on this observation, we question the initial accuracy of measures of mobility limitations, which could be later ameliorated through individuals’ ability to learn about their health capacities over time. We provide empirical evidence to show that this unusually high incidence of recovery from mobility limitations could be in part the result of respondents’ improvement on health knowledge of questions on mobility limitations or improved experience with the activities instead of caused by real health improvement. Our results are not only relevant to any empirical researchers using mobility limitation indicators in a panel data setting, but also to researchers analyzing the effectiveness of policy interventions on health outcomes using self-reported health measures, since the effects of these policies are likely to be confounded with improvements in health knowledge, and the results can be biased towards surprisingly large short-run effects and much smaller medium and long-run effects.
"Measuring Income Sources, and the Link between Income and Wealth in Old Age"
with Hugo Benitez-Silva
We propose to contribute to the large literature on the income and wealth measures among older Americans by using some of the most widely used data sets to study income sources for Americans older than 50 years of age, but with the focus on the relationship between labor income and non-labor income in the transition to Old Age. This focus provides surprisingly sharp and original results regarding long-standing questions in the literature, like those connected to the definition of retirement or the empirical underpinnings of income replacement ratios. We propose the use of the labor income to non-labor income ratio (LI2NLIR) as a tool to study the complex transitions faced by Americans in Old Age. Our preliminary empirical analysis shows that the HRS and the PSID provide similar predictions which allow us to infer a new retirement indicator and encourages us to study this further using more data from these sources, as well as more data sources like the SCF. We also find that housing wealth (and potentially other measures of wealth) has not received enough attention as a source of retirement well-being, and find that, for many homeowners, it provides (under certain assumptions) a source of income of comparable size to Social Security retirement benefits.
"Stability between Taiwan and China --- Measuring with Uncertainty Index"