Research
Working Papers
The Labor Demand and Labor Supply Channels of Monetary Policy (with Sebastian Graves and Eric T. Swanson) [pdf] [data] (See also NBER WP31770)
Latest draft: February 2026 (recently updated)
Revise and resubmit (resubmitted), Review of Economic Studies
Monetary policy is conventionally understood to influence labor demand, with little effect on labor supply. We estimate the response of labor market flows to high-frequency changes in interest rates around FOMC announcements and Fed Chair speeches and find evidence that, in contrast to the consensus view, a contractionary monetary policy shock leads to a significant increase in labor supply: workers reduce the rate at which they quit jobs to non-employment, and non-employed individuals increase their job-seeking behavior. These effects are quantitatively important: holding supply-driven labor market flows constant, the decline in employment from a contractionary monetary policy shock would be twice as large. To interpret our findings, we estimate a heterogeneous agent model with frictional labor markets and an active labor supply margin. The model rationalizes existing estimates of small labor supply responses to idiosyncratic transfers with our new evidence of a large labor supply response to an aggregate shock.
The Active Search Premium (with Sebastian Graves) [slides] (Currently under revision; email for latest draft. Previously circulated as “The Marginal Efficiency of Active Search” [prior version].)
We document that the job-finding rate premium for active searchers relative to comparable nonparticipants is surprisingly small, strongly procyclical, and declining in the aggregate quantity of active search. We test and reject the assumption that active and passive search are perfect substitutes in the matching function—revisiting an observation first made by Blanchard and Diamond (1989). The estimated elasticity of substitution is well below one, thus implying a crowding-out of active search: as more workers search actively and each searches more intensively, the marginal return to each worker’s active search declines. This crowding-out peaks during recessions, when active search surges relative to passive: during the Great Recession, the return to active search falls by half. We show that this generates a novel source of time variation in the micro-elasticity of the Baily-Chetty formula for optimal unemployment insurance: as the return to active search declines during recessions, UI becomes less distortionary, implying substantially more generous optimal benefits.
Publications
Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics (with Mark Gertler and Antonella Trigari) [pdf] See also NBER WP30134, and non-technical summary in the NBER Digest.
Latest: August 2025
Forthcoming, American Economic Review
We revisit the role of temporary layoffs in the business cycle. While many have emphasized a stabilizing effect due to recall hiring, we quantify from the data an important countercyclical destabilizing effect due to “loss-of-recall”, whereby workers in temporary-layoff unemployment lose their job permanently. We develop a quantitative model allowing for endogenous flows of workers across employment and both temporary-layoff and jobless unemployment. The model captures both pre- and post-pandemic unemployment dynamics, including the recessionary role of loss-of-recall. We use our structural model to show that the Paycheck Protection program generated sizable employment gains, in part by significantly reducing loss-of-recall.
Understanding the Scarring Effect of Recessions [pdf] [Supplementary Appendix] [journal version] [wp] (See also Aug 2021 version, Mar 2016 version)
American Economic Review, 2022
This paper documents that the earnings cost of job loss is concentrated among workers who find reemployment in lower-skill occupations, and that the cost and incidence of such occupation displacement is higher for workers who lose their job during a recession. I propose a model where hiring is endogenously more selective during recessions, leading some unemployed workers to optimally search for reemployment in lower-skill jobs. The model accounts for existing estimates of the size and cyclicality of the present value cost of job loss, and the cost of entering the labor market during a recession.
Unemployment Fluctuations, Match Quality, and the Wage Cyclicality of New Hires (with Mark Gertler and Antonella Trigari) [pdf] [Supplementary Appendix] [journal version] [wp] (See also NBER WP22341)
Review of Economic Studies, 2020
We revisit the issue of the high cyclicality of wages of new hires. We show that after controlling for composition effects likely involving procyclical upgrading of job match quality, the wages of new hires are no more cyclical than those of existing workers. The key implication is that the sluggish behavior of wages for existing workers is a better guide to the cyclicality of the marginal cost of labor than is the high measured cyclicality of new hires wages unadjusted for composition effects. Key to our identification is distinguishing between new hires from unemployment versus those who are job changers. We argue that to a reasonable approximation, the wages of the former provide a composition-free estimate of the wage flexibility, while the same is not true for the latter. We then develop a quantitative general equilibrium model with sticky wages via staggered contracting, on-the-job search, and heterogeneous match quality, and show that it can account for both the panel data evidence and aggregate evidence on labor market volatility.