Limited Participation, Unemployment, and Inflation
Abstract: This paper explores the extent to which limited participation in the labor market -- sustained unemployment and labor force withdrawal -- reconciles the absence of a long-run relation between unemployment and inflation in the U.S. since 2008. I provide preliminary evidence on a potential role for limited participation. Then I build a tractable general equm framework of labor participation and money based on frictions in labor and goods markets. The equilibrium generically exists and multiple equalibria can occur. A novel feature is that cyclical selection affects both intensive and extensive margins of labor supply: during bad times, job matches have to be unusually productive to warrant job creation -- counter-cyclical selection -- reducing the "liquidity" in the labor market; it also induces more workers in bad matches to quit -- pro-cyclical selection -- contracting the labor force. Another novel feature is that movements in and out of the labor force makes unemployment less reponsive to changes in inflation. I apply the framework to numerical illustrations and depart from the literature in identifying three key parameters: marginal product, the utility of leisure, and workers' bargaining power. Results show that labor market shocks that affect participation dominate monetary policy shock in explaining the absence of a long-run association between unemployment and inflation. Markup and workers's bargaining power have negligible effects.
Intermediation and Imperfect Credit (with Wright, Qiao, and Gong)
Abstract: We study environments with intermediation (trade via middlemen) and credit that is constrained (either exogenously, or endogenously due to limited commitment). Existing models of middlemen assume they have advantages in search, bargaining, information, etc. Here they have advantages using credit, because they are better at credibly promising payments or enforcing others’ payments. With exogenous debt limits there is a unique equilibrium transaction pattern — direct trade, indirect trade, or both — depending on parameters. With endogenous limits, there are multiple equilibria, including ones where credit conditions fluctuate as self-fulfilling prophecies. Depending on details, intermediaries may attenuate or amplify credit cycles.
Refereed Publications
Millennials' transition from School to Work (with Bowlus, full version) Economics Letters (2024)
A Dynamic Duration Approach to Venture Capital Exit Finance Research Letter (lead article) (2024)
Intermediation in Markets for Goods and Markets for Assets (with Nosal and Wright) Journal of Economic Theory, 183 (2019): 876-906
More on Middlemen: Equilibrium Entry and Efficiency in Markets with Intermediation (with Nosal and Wright) Journal of Money, Credit, and Banking (lead article), 47 (2015): 7-37
Buyers, Sellers, and Middlemen: Variation in Search Theoretic Themes (with Wright), International Economics Review, 55 (2014):375-397
Computers and Gender Wage Differences. Journal of Income Distribution, special issue edited by M. Sattinger, 17, n3 (2008): 93-114.
A Bivariate Interval Censorship Model for Partnership Formation (with Yu), Journal of Multivariate Analysis, 98, n2 (2007): 370-383.
On Estimation of a Two-Sided Matching Model, in Contributions to Economic Analysis: Structural Models of Wage and Employment Dynamics, edited by Bunzel, H., B.J. Christensen, G. Neumann, and J-M Robin —North-Holland. 2006.
Why Do Only 5.5% of Black Men Marry White Women? The Impact of the Mating Taboo, Courtship Opportunities, and Individual Endowments, International Economics Review (lead article) 44, n3 (2003): 803-826.
Structural Estimation of Marriage Models, Journal of Labor Economics, 21, n3 (2003): 699-728.
Can the Mortensen-Pissarides Model with Productivity Changes Explain U.S. Wage Inequality? Journal of Labor Economics, 21, n1 (2003): 70-105
Specific-Capital in an Equilibrium Search Model, Economic Letters, 74 (2002): 203-209
Wage Differences and the Mating Taboo, 1970-1980, Journal of Economics, 28 (2001): 21-40.
Memeos
Structural Unemployment Duration (2017)
Does Marriage Make Cents? (2016)
Venture Capital Cycle (2016)