Job Selection and Wages over the Business Cycle

By Marcus Hagedorn and Iourii Manovskii

American Economic Review, April 2013

We consider a model with on-the-job search where current wages depend only on current aggregate labor market conditions and idiosyncratic match-specific productivities. We show theoretically that the model replicates the findings in Bils (1985) and Beau...

Misclassification Errors and the Underestimation of the US Unemployment Rate

By Shuaizhang Feng and Yingyao Hu

American Economic Review, April 2013

Using recent results in the measurement error literature, we show that the official US unemployment rate substantially underestimates the true level of unemployment, due to misclassification errors in the labor force status in the Current Population Surve...

Cyclical Variation in Labor Hours and Productivity Using the ATUS

By Michael C. Burda, Daniel S. Hamermesh, and Jay Stewart

American Economic Review, May 2013

We examine monthly variation in weekly work hours using data from 2003 to 2010. The data sources include the Current Population Survey (CPS) on hours/worker, the Current Employment Survey (CES) on hours/job, and the American Time Use Survey (ATUS) on both...

Comparisons of Weekly Hours over the Past Century and the Importance of Work-Sharing Policies in the 1930s

By Todd C. Neumann, Jason E. Taylor, and Price Fishback

American Economic Review, May 2013

Changes in the work week drove a larger portion of changes in total labor input during the Great Depression of the 1930s than during other decades. Work-sharing policies appear to be responsible. Herbert Hoover created various work-sharing committees--led...

How Much Would US Style Fiscal Integration Buffer European Unemployment and Income Shocks? (A Comparative Empirical Analysis)

By James Feyrer and Bruce Sacerdote

American Economic Review, May 2013

We examine the degree to which federal fiscal integration smoothes income and unemployment shocks across US States. We find that roughly 25 cents of every dollar of income shock at the state level is offset by federal fiscal policy. This stabilization com...

Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data

By Michael T. Owyang, Valerie A. Ramey, and Sarah Zubairy

American Economic Review, May 2013

A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple l...

Place Based Policies with Unemployment

By Patrick Kline and Enrico Moretti

American Economic Review, May 2013

We develop a stylized model of frictional local labor markets with the goal of studying the efficiency of unemployment differences across areas. The model adapts the widely used Diamond-Mortensen-Pissarides framework to a local labor market setting with a...

Credit Risk and Disaster Risk

By François Gourio

American Economic Journal: Macroeconomics, July 2013

Credit spreads are large, volatile, and countercyclical, and recent empirical work suggests that risk premia, not expected credit losses, are responsible for these features. Building on the idea that corporate debt, while fairly safe in ordinary recess...

Downward Nominal Wage Rigidity and the Case for Temporary Inflation in the Eurozone

[Symposium: The Euro]

By Stephanie Schmitt-Grohé and Martin Uribe

Journal of Economic Perspectives, Summer 2013

Since the onset of the Great Recession in peripheral Europe, nominal hourly wages have not fallen from the high levels they had reached during the boom years -- this in spite of widespread increases in unemployment. This observation evokes a well-known ...

The China Syndrome: Local Labor Market Effects of Import Competition in the United States

By David H. Autor, David Dorn, and Gordon H. Hanson

American Economic Review, October 2013

We analyze the effect of rising Chinese import competition between 1990 and 2007 on US local labor markets, exploiting cross- market variation in import exposure stemming from initial differences in industry specialization and instrumenting for US imp...

Does the Federal Reserve Care about the Rest of the World?

[Symposium: The First 100 Years of the Federal Reserve]

By Barry Eichengreen

Journal of Economic Perspectives, Fall 2013

Many economists are accustomed to thinking about Federal Reserve policy in terms of the institution's "dual mandate," which refers to price stability and high employment, and in which the exchange rate and other international variables matter only insof...

Some Evidence on the Importance of Sticky Wages

By Alessandro Barattieri, Susanto Basu, and Peter Gottschalk

American Economic Journal: Macroeconomics, January 2014

We present evidence on the frequency of nominal wage adjustment using SIPP data adjusted for measurement error. The SIPP is a representative sample of the US population. Our main results are: (i) The average quarterly probability of a nominal wage chan...

A Theory of Countercyclical Government Multiplier

By Pascal Michaillat

American Economic Journal: Macroeconomics, January 2014

I develop a New Keynesian model in which a type of government multiplier doubles when unemployment rises from 5 percent to 8 percent. This multiplier indicates the additional number of workers employed when one worker is hired in the public sector. Gra...

From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy

By Christian Dustmann, Bernd Fitzenberger, Uta Schönberg, and Alexandra Spitz-Oener

Journal of Economic Perspectives, Winter 2014

In the late 1990s and into the early 2000s, Germany was often called "the sick man of Europe." Indeed, Germany's economic growth averaged only about 1.2 percent per year from 1998 to 2005, including a recession in 2003, and unemployment rates rose from ...

Do Employers Use Unemployment as a Sorting Criterion When Hiring? Evidence from a Field Experiment

By Stefan Eriksson and Dan-Olof Rooth

American Economic Review, March 2014

The stigma associated with long-term unemployment spells could create large inefficiencies in labor markets. While the existing literature points toward large stigma effects, it has proven difficult to estimate causal relationships. Using data from a fiel...

Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve

By Sophocles Mavroeidis, Mikkel Plagborg-Møller, and James H. Stock

Journal of Economic Literature, March 2014

We review the main identification strategies and empirical evidence on the role of expectations in the New Keynesian Phillips curve, paying particular attention to the issue of weak identification. Our goal is to provide a clear understanding of the role ...

Retrospectives: The Cyclical Behavior of Labor Productivity and the Emergence of the Labor Hoarding Concept

By Jeff E. Biddle

Journal of Economic Perspectives, Spring 2014

The concept of "labor hoarding," at least in its modern form, was first fully articulated in the early 1960s by Arthur Okun (1963). By the end of the 20th century, the concept of "labor hoarding" had become an accepted part of economists' explanations of ...

Inflation Persistence, the NAIRU, and the Great Recession

By Mark W. Watson

American Economic Review, May 2014

The rate of inflation fell far less over the period 2007-2013 than in the period 1979-1985 despite similar large increases in the unemployment rate. This paper asks why. Possible explanations include a change in the persistence of inflation, changes in NA...

Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?

By François Gourio and Leena Rudanko

American Economic Review, May 2014

Intangible capital is an important factor of production in modern economies that is generally neglected in business cycle analyses. We demonstrate that intangible capital can have a substantial impact on business cycle dynamics, especially if the intangib...

The Determinants of the Macroeconomic Implications of Aging

By Louise Sheiner

American Economic Review, May 2014

The aging of the US population undoubtedly will be associated with macroeconomic changes. In particular, some combination of lower consumption growth and increased labor input will ultimately be required. But, the timing of these changes can have importan...