Working Papers

Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics (with Mark Gertler and Antonella Trigari) [pdf] (See also NBER WP30134)

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.


The Marginal Efficiency of Active Search [slides]

Search-theoretic models of the labor market typically impose that active and passive search enter a matching function as perfect substitutes, implying that the marginal efficiencies of active and passive search are constant. I study a DMP model with intensive and extensive margins of active search and formulate a testable restriction of this assumption. The restriction is rejected in the data. Instead, the data indicate that the marginal efficiency of active search declines during recessions. These findings help rationalize estimates from the existing literature indicating a modest response of unemployment to expansions of unemployment insurance during expansions.


Understanding the Scarring Effect of Recessions [pdf] [Supplementary Appendix]
American Economic Review, 2022.
(See also [Nov. 2021 version], [Aug. 2021 version], [2016 version])

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] [wp]
Review of Economic Studies, 2020. (See also NBER WP22341)

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.