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Marriott Marquis, La Costa
Hosted By:
Econometric Society
Business Cycles and Labor Markets
Paper Session
Sunday, Jan. 5, 2020 1:00 PM - 3:00 PM (PDT)
- Chair: Cynthia Doniger, Federal Reserve Board
Measuring Labor-Force Participation and the Incidence and Duration of Unemployment
Abstract
The underlying data from which the U.S. unemployment rate, labor-force participation rate, and duration of unemployment are calculated contain numerous internal contradictions. This paper catalogs these inconsistencies and proposes a reconciliation. We find that the usual statistics understate the unemployment rate and the labor-force participation rate by about two percentage points on average and that the bias in the latter has increased since the Great Recession. The BLS estimate of the average duration of unemployment overstates by 50% the true duration of uninterrupted spells of unemployment and misrepresents what happened to average durations during the Great Recession and its recovery.Do Greasy Wheels Curb Inequality?
Abstract
I document a disparity in the cyclicality of the allocative wage-the labor costs considered when deciding to form or dissolve an employment relationship-across levels of educational attainment. Specifically, workers with a bachelor's degree or more exhibit an allocative wage that is highly pro-cyclical while high school dropouts exhibit no statistically discernible cyclical pattern. I also assess the response to monetary policy shocks of both employment and allocative wages across education groups. The less educated respond to monetary policy shocks on the employment margin while the more educated respond on the wage margin. An important takeaway is that conventional monetary policy easing reduces employment inequality but increases wage inequality. I embed these findings in a New Keynesian that framework includes price and heterogeneous wage rigidity and show that heterogeneity results in welfare losses due to fluctuations that exceed those of the output-gap and price-level equivalent representative agent economy. The excess welfare loss is borne by the least educated.Sectoral Media Focus and Aggregate Fluctuations
Abstract
We formalize the editorial role of news media in a multi-sector economy and show that it can be an independent source of aggregate business cycle fluctuations, even when sector developments are reported accurately. In the model, news media monitor the economy on behalf of firms and make state-dependent decisions about which subset of sectors to report on. The proposed approach tightly links agents' beliefs to real economic developments and allows for incomplete information without exogenous noise shocks. Accurate public reporting about a sector that is unrepresentative of the economy as a whole causes firms across all sectors to over- or underinvest in productive capacity relative to a full information benchmark. We construct a novel data set of sectoral news coverage in the US and use it together with standard input-output tables to calibrate a 30-sector model that can replicate several features of aggregate and sectoral output.Credit Supply, Firms, and Earnings Inequality
Abstract
We study the effect of a firm-level credit supply shock on the distribution of pay and employment across workers. To this end, we first construct a novel dataset that links individual employment histories to firms' bank-credit relationships in Germany. We then use firms' differential exposure to negative monetary policy rates through their preexisting banking relationships as a source of variation in credit supply. We find that within firms that experience a negative credit supply shock, previously lower-paid workers are more likely to be fired, while previously higher-paid workers are more likely to have their wages cut. As a consequence, wage inequality within affected firms drops. Our results suggest that monetary policy can have important distributional consequences by having heterogeneous effects on firms' credit, pay, and employment decisions.JEL Classifications
- J2 - Demand and Supply of Labor
- E3 - Prices, Business Fluctuations, and Cycles