Search Constraints
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Creator: Moser, Christian A. and Yared, Pierre Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 627 Abstract: This paper studies lockdown policy in a dynamic economy without government commitment. Lockdown imposes a cap on labor supply, which improves health prospects at the cost of economic output and consumption. A government would like to commit to the extent of future lockdowns in order to guarantee an economic outlook that supports efficient levels of investment into intermediate inputs. However, such a commitment is not credible, since investments are sunk at the time when the government chooses a lockdown. As a result, lockdown under lack of commitment deviates from the optimal policy. Rules that limit a government’s lockdown discretion can improve social welfare, even in the presence of noncontractible information. Quantitatively, lack of commitment causes lockdown to be significantly more severe than is socially optimal. The output and consumption loss due to lack of commitment is greater for higher intermediate input shares, higher discount rates, higher values of life, higher disease transmission rates at and outside of work, and longer vaccine arrival times.
Keyword: Pandemic restrictions, SARS-CoV-2, Non-pharmaceutical interventions, SIRD model, Lockdown, Optimal policy, Commitment, Coronavirus, Flexibility, COVID-19, and Rules Subject (JEL): E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, I18 - Health: Government Policy; Regulation; Public Health, and H12 - Crisis Management -
Creator: Babina, Tania, Ma, Wenting, Moser, Christian A., Ouimet, Paige P., and Zarutskie, Rebecca, 1976- Series: Institute working paper (Federal Reserve Bank of Minneapolis. Opportunity and Inclusive Growth Institute) Number: 021 Abstract: Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.
Keyword: Startups, Worker and firm heterogeneity, Selection, Firm dynamics, and Young-firm pay premium Subject (JEL): J31 - Wage Level and Structure; Wage Differentials, J30 - Wages, Compensation, and Labor Costs: General, D22 - Firm Behavior: Empirical Analysis, M13 - New Firms; Startups, and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity -
Creator: Engbom, Niklas and Moser, Christian A. Series: Institute working paper (Federal Reserve Bank of Minneapolis. Opportunity and Inclusive Growth Institute) Number: 007 Abstract: We show that an increase in the minimum wage can have large effects throughout the earnings distribution, using a combination of theory and evidence. To this end, we develop an equilibrium search model featuring empirically relevant worker and firm heterogeneity. The minimum wage induces firms to adjust their equilibrium wage and vacancy policies, leading to spillovers on higher wages. We use the estimated model to evaluate the effects of a 119 percent increase in the real minimum wage in Brazil from 1996 to 2012. The policy change explains a large decline in earnings inequality, with spillovers reaching up to the 80th percentile of the earnings distribution. At the same time, employment and output fall only modestly as workers relocate to more productive firms. Using administrative linked employer-employee data and two household surveys, we find reduced-form evidence in support of the model predictions.
Keyword: Spillovers, Minimum wage, Equilibrium search model, and Worker and firm heterogeneity Subject (JEL): J31 - Wage Level and Structure; Wage Differentials, E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, E64 - Incomes Policy; Price Policy, E25 - Aggregate Factor Income Distribution, and E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination -
Creator: Moser, Christian A. and Olea de Souza e Silva, Pedro Series: Institute working paper (Federal Reserve Bank of Minneapolis. Opportunity and Inclusive Growth Institute) Number: 017 Abstract: We study optimal savings policies when there is a dual concern about undersaving for retirement and income inequality. Agents differ in present bias and earnings ability, both unobservable to a planner with paternalistic and redistributive motives. We characterize the solution to this two-dimensional screening problem and provide a decentralization using realistic policy instruments: mandatory savings at low incomes but a choice between subsidized savings vehicles at high incomes—resembling Social Security, 401(k), and IRA accounts in the US. Offering more savings choice at higher incomes facilitates redistribution. To solve large-scale versions of this problem numerically, we propose a general, computationally stable, and efficient active-set algorithm. Relative to the current US retirement system, we find significant welfare gains from increasing mandatory savings and limiting savings choice at low incomes.
Keyword: Preference heterogeneity, Retirement, Paternalism, Active-set algorithm, Multidimensional screening, Optimal taxation, Social Security, Savings, and Present bias Subject (JEL): E62 - Fiscal Policy, H55 - Social Security and Public Pensions, and H21 - Taxation and Subsidies: Efficiency; Optimal Taxation