Abstract: Benchmark models of structural transformation focus on the reallocation of employment across sectors while assuming that overall employment stays constant. We show that this assumption does not match facts for developing economies. We study a panel of 48 mostly developing economies over the period 1990--2018 and document a strong positive relationship between the share of the population employed in agriculture and the overall employment rate. That is, the early part of the development process is associated with a substantial decline in the total employment rate. Motivated by this finding, we extend a benchmark model of structural change featuring Stone-Geary preferences to allow for endogenous labor supply. We show that this model can account for the patterns we document in the data both qualitatively and quantitatively. We use a calibrated version of our model to study the employment dynamics in several developing economies and show that structural change is a quantitatively important source of employment changes during the early stages of development.
Temptation, Self-Control, and the Design of Optimal Unemployment Insurance, with Pei-Cheng Yu
previously titled "Optimal Unemployment Insurance with Costly Self-Control"
Abstract: The paper studies optimal unemployment insurance when unemployed workers have temptation and self‑control preferences. Motivated by evidence that unemployed workers undervalue the future benefits of job search, a utility cost is incurred when the unemployed worker's job search choice deviates from the choice that maximizes instantaneous utility and disregards future utility. Compared to the standard model, the optimal unemployment insurance in our setup features lower benefit levels and a flatter benefit profile over the unemployment spell. In addition, it prescribes a one-time reward upon reemployment and a consumption floor for unemployed workers, thereby avoiding immiseration. These findings suggest that a back-to-work bonus and food assistance benefits in many U.S. states are broadly in line with such an optimal unemployment system.
A Quantitative Analysis of Multidimensional Changes in Unemployment Insurance Policies, with Lei Fang and Jun Nie
Paper download (Updated June 2026; First version July 2020) Revise & Resubmit at JEDC
Abstract: The US government has historically expanded unemployment insurance (UI) during economic downturns along three policy dimensions: benefit amount, duration, and eligibility. We study how these elements affect the labor market, focusing in particular on the interaction among them. Specifically, we quantify the impact of the Coronavirus Aid, Relief, and Economic Security (CARES) Act UI package, which combined all three during the COVID-19 pandemic. The package raised average unemployment rate by 1.05 percentage points during April–December 2020. Two-thirds of this effect resulted from amplification by economic shutdown policies and COVID-19 infection risk. Decomposing the CARES Act UI package reveals that interactions between the three policy dimensions accounted for one-fourth of the total effect, highlighting that policy components do not operate in isolation.