In employment relationships, a wage is an installment payment on an implicit long-term agreement between a worker and a firm. The price of labor that impacts firm's hiring decisions, instead, ...reflects the hiring wage as well as the impact of economic conditions at the time of hiring on future wages. Measured by the labor's user cost, the price of labor is substantially more pro-cyclical than the new-hire wage or the average wage. The strong procyclicality of the price of labor calls for other forces for cyclical labor demand to explain employment fluctuations.
The user cost of labor is the expected difference between the present discounted value of wages paid to a worker hired in the current period and that paid to a worker hired in the next period. ...Analogous to the price of any long-term asset, the user cost, not wage, is the relevant price for a firm that is considering adding a worker. I construct its counterpart in the data and estimate that it is substantially more procyclical than average wages or wages of newly hired workers. I demonstrate an application of the finding using the textbook search and matching model.
•The user cost of labor acknowledges labor to be a long-term asset with adjustment costs.•The user cost is more procyclical than average wages or wages of newly hired workers.•The estimate of its cyclicality is used to study the unemployment-volatility puzzle.
We quantify the effect of recourse on default and find that recourse affects default by lowering the borrower's sensitivity to negative equity. At the mean value of the default option for defaulted ...loans, borrowers are 30% more likely to default in non-recourse states. Furthermore, for homes appraised at $500,000 to $750,000, borrowers are twice as likely to default in non-recourse states. We also find that defaults are more likely to occur through a lender-friendly procedure, such as a deed in lieu, in states that allow deficiency judgments. We find no evidence that mortgage interest rates are lower in recourse states.
Abstract
Using household-level debt data over 2000–2012 and local variation in inequality, we show that low-income households in high-inequality regions (zip codes, counties, states) accumulated less ...debt relative to their income than low-income households in lower inequality regions. We also find evidence that low-income households face higher credit prices and reduced access to credit as inequality increases. We argue that these patterns are consistent with inequality tilting credit supply away from low-income households and toward high-income households, which may have long-run implications for outcomes like homeownership or entrepreneurship.
We use online job application data to study the relationship between search intensity and search duration. The data allow us to control for job seeker composition and the evolution of available job ...openings over the duration of search. We find that, within an individual search spell, search intensity declines continuously. We also find that longer-duration job seekers search more intensely throughout their search. They tend to be older, male, nonemployed, and live in areas with weaker labor markets. Our findings contradict standard assumptions of labor search models. We discuss how to reconcile the theory with our evidence.
•The pandemic shock caused an outburst of unemployment of a different kind from any other recessionary shock.•This kind of unemployment—temporary-layoff unemployment—recovers at a much faster pace ...than a typical jobless unemployment, because most of these unemployed are actually recalled and the time-consuming search and matching process that impedes a quick recovery is avoided.•The labor market during the pandemic remained relatively tight—both temporary-layoff and jobless unemployed people found jobs about as easily in the pandemic as in normal times.•Despite these factors, the bulge of unemployment in 2020 and 2021 involved a huge social cost.
Potential workers are classified as unemployed if they seek work but are not working. The unemployed population contains two groups—those with jobs and those without jobs. Those with jobs are on furlough or temporary layoff. This group expanded tremendously in April 2020, at the trough of the pandemic recession. They wait out periods of non-work with the understanding that their jobs still exist and that they will be recalled. We show that the resulting temporary-layoff unemployment mostly dissipated by the end of 2020. Potential workers without jobs constitute what we call jobless unemployment. Shocks that elevate jobless unemployment have much more persistent effects. Historical major adverse shocks, such as the financial crisis in 2008, created mostly jobless unemployment and consequently caused extended periods of elevated unemployment. Jobless unemployment reached its pandemic peak in November 2020, at 4.9%, modest by historical standards, and has declined at a faster-than-historical pace since.
Abstract
We use regional variation in the American Recovery and Reinvestment Act (2009–12) to analyse the effect of government spending on consumer spending. Our consumption data come from ...household-level retail purchases in the Nielsen scanner data and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases local non-durable consumer spending by $0.29 and local auto spending by $0.09. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, new Keynesian model with heterogeneous agents, incomplete markets, and trade linkages. Our model is consistent with the estimated positive local multiplier, a result that distinguishes our incomplete markets model from models with complete markets. At the zero lower bound, the aggregate consumption multiplier is twice as large as the local multiplier because trade linkages propagate the effect of government spending across regions.
We study a new law that restricts credit to individuals under age 21. We first use a difference-in-difference approach to estimate the effect of the law on credit card availability. Following the ...passage of the law, individuals under age 21 are 8 percentage points (15%) less likely to have a credit card, have fewer cards, and, conditional on having a card at all, are 35% more likely to have a cosigned card. We then use data from before the passage of the law to identify the characteristics of those individuals most likely to be affected by the Act.
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