Understanding the Scarring Effect of Recessions

By Christopher Huckfeldt

American Economic Review, April 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 reces...

Optimal Currency Areas with Labor Market Frictions

By Rohan Kekre

American Economic Journal: Macroeconomics, April 2022

I study efficiency and optimal monetary policy in a two-country monetary union with frictional labor markets. With heterogeneity in labor market frictions, the constrained efficient allocation generically cannot be achieved even if productivity shocks aff...

Sectoral Heterogeneity and Monetary Policy

By Jonathan Kreamer

American Economic Journal: Macroeconomics, April 2022

Since sectors differ in their sensitivity to interest rates, monetary policy produces inefficient sectoral fluctuations. In a model with sectoral heterogeneity, I show that policymakers should weight sectors proportionally to their interest elasticities, ...

Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance

By Christopher Busch, David Domeij, Fatih Guvenen, and Rocio Madera

American Economic Journal: Macroeconomics, April 2022

We provide new evidence on business cycle fluctuations in skewed labor income risk in the United States, Germany, Sweden, and France. We document four results. First, in all countries, the skewness of individual income growth is strongly procyclical, wher...

Pigouvian Cycles

By Renato Faccini and Leonardo Melosi

American Economic Journal: Macroeconomics, April 2022

Current and expected unemployment rates contain information that is highly useful to estimate the effect of news about TFP and to allow a general equilibrium rational expectations model to generate Pigouvian cycles: a large fraction of the comovement of o...

Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis

By David Baqaee and Emmanuel Farhi

American Economic Review, May 2022

We study supply and demand shocks in a disaggregated model with multiple sectors, multiple factors, input-output linkages, downward nominal wage rigidities, credit-constraints, and a zero lower bound. We use the model to understand how the COVID-19 cris...

Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?

By Veronica Guerrieri, Guido Lorenzoni, Ludwig Straub, and Iván Werning

American Economic Review, May 2022

Motivated by the effects of the COVID-19 pandemic, we present a theory of Keynesian supply shocks: shocks that reduce potential output in a sector of the economy, but that, by reducing demand in other sectors, ultimately push aggregate activity below pote...

The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund

By Damon Jones and Ioana Marinescu

American Economic Journal: Economic Policy, May 2022

Since 1982, all Alaskan residents have received a yearly cash dividend from the Alaska Permanent Fund. Using the Current Population Survey and a synthetic control method, this paper shows that the dividend had no effect on employment and increased part-ti...

Should We Insure Workers or Jobs during Recessions?

[Symposium: Macro Policy in the Pandemic]

By Giulia Giupponi, Camille Landais, and Alice Lapeyre

Journal of Economic Perspectives, Spring 2022

What is the most efficient way to respond to recessions in the labor market? To this question, policymakers on the two sides of the pond gave diametrically opposed answers during the COVID-19 crisis. In the United States, the focus was on insuring worke...

The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did It Go There?

[Symposium: Macro Policy in the Pandemic]

By David Autor, David Cho, Leland D. Crane, Mita Goldar, Byron Lutz, Joshua Montes, William B. Peterman, David Ratner, Daniel Villar, and Ahu Yildirmaz

Journal of Economic Perspectives, Spring 2022

The Paycheck Protection Program (PPP) provided small businesses with roughly $800 billion dollars in uncollateralized, low-interest loans during the pandemic, almost all of which will be forgiven. With 94 percent of small businesses ultimately receiving...

Who Talks to Whom? Intra- and Interdisciplinary Communication of Economics Journals

By Rik Pieters and Hans Baumgartner

Journal of Economic Literature, June 2002

Citation patterns between 42 journals in economics from 1995 to 1997 are examined, plus between economics and anthropology, political science, psychology, sociology and five business disciplines. Building on social network theory, we identify a hierarchic...

Immigration and Labor Market (Mis)perceptions

By Nicolás Ajzenman, Patricio Dominguez, and Raimundo Undurraga

AEA Papers and Proceedings, May 2022

Exposure to immigrants often triggers sentiments of hostility and backlash among native-born populations. Among the main concerns identified by surveys, labor market conditions typically rank at the top. We combine a two-way fixed effects model with a Bar...

Monetary Policy, Labor Market, and Sectoral Heterogeneity

By Aarti Singh, Jacek Suda, and Anastasia Zervou

AEA Papers and Proceedings, May 2022

We study the effects of monetary policy on the labor market across different sectors. We find that the employment response is stronger for firms in manufacturing and construction relative to firms in services. The result also holds within small and large ...

Persistent Monetary Policy in a Model with Labor Market Frictions

By Roman Goncharenko and Elizaveta Lukmanova

AEA Papers and Proceedings, May 2022

In a basic New Keynesian DSGE model with involuntary unemployment and inflation target shocks, we study the role of labor markets in the transmission of persistent monetary policy shocks that increase households' inflation expectations. The model predicts...

Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical-Care Reform

By David M. Cutler

Journal of Economic Literature, September 2002

Public opinion surveys uniformly show low support for medical-care systems in developed countries. The longstanding conflict between equal access to care and efficient service provision partly explains this dissatisfaction. But the trade-off is particular...

Measuring Human Capital

[Symposium: Human Capital]

By Katharine G. Abraham and Justine Mallatt

Journal of Economic Perspectives, Summer 2022

We review the existing literature on the measurement of human capital. Broadly speaking, economists have proposed three approaches to constructing human capital measures—the indicator approach, the cost approach, and the income approach. Studies emplo...

Retrospectives: On the Evolution of the Rules versus Discretion Debate in Monetary Policy

By Harris Dellas and George S. Tavlas

Journal of Economic Perspectives, Summer 2022

Episodes of macroeconomic upheaval associated with monetary policy failure have provided the stage for important debates on rules versus discretion. We discuss the main features, results, commonalities, and differences in the debates that emerged after ...

Age Structure and the Impact of Monetary Policy

By John V. Leahy and Aditi Thapar

American Economic Journal: Macroeconomics, October 2022

We exploit cross-sectional variation in the response of US states to an identified monetary policy shock to study how the impact of monetary policy varies with the age structure of the population. We find that the economy's response is weaker the greater ...

Learning on the Job and the Cost of Business Cycles

By Karl Walentin and Andreas Westermark

American Economic Journal: Macroeconomics, October 2022

We show that business cycles reduce welfare through a decrease in the average level of employment in a labor market search model with learning on the job and skill loss during unemployment. Empirically, unemployment and the job-finding rate are negatively...

Danish Flexicurity: Rights and Duties

[Symposium: Labor Market Institutions]

By Claus Thustrup Kreiner and Michael Svarer

Journal of Economic Perspectives, Fall 2022

Denmark is one of the richest countries in the world and achieves this in combination with low inequality, low unemployment, and high-income security. This performance is often attributed to the Danish labor market model characterized by what has become...