Creator: Chodorow-Reich, Gabriel and Karabarbounis, Loukas Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 514 Abstract:
The flow opportunity cost of moving from unemployment to employment consists of foregone public benefits and the foregone value of non-working time in units of consumption. We construct a time series of the opportunity cost of employment using detailed microdata and administrative or national accounts data to estimate benefit levels, eligibility and take-up of benefits, consumption by labor force status, hours per worker, taxes, and preference parameters. Our estimated opportunity cost is procyclical and volatile over the business cycle. The estimated cyclicality implies far less unemployment volatility in many leading models of the labor market than that observed in the data, irrespective of the level of the opportunity cost.
Stichwort: Opportunity cost of employment and Unemployment fluctuations Fach: E32 - Business Fluctuations; Cycles, E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, and J64 - Unemployment: Models, Duration, Incidence, and Job Search
Creator: Guvenen, Fatih, Ozkan, Serdar, and Song, Jae Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 476 Abstract:
This paper studies the nature of business cycle variation in individual earnings risk using a confidential dataset from the U.S. Social Security Administration, which contains (uncapped) earnings histories for millions of individuals. The base sample is a nationally representative panel containing 10 percent of all U.S. males from 1978 to 2010. We use these data to decompose individual earnings growth during recessions into “between-group” and “within-group” components. We begin with the behavior of within-group shocks. Contrary to past research, we do not find the variance of idiosyncratic earnings shocks to be countercyclical. Instead, it is the left-skewness of shocks that is strongly countercyclical. That is, during recessions, the upper end of the shock distribution collapses—large upward earnings movements become less likely—whereas the bottom end expands—large drops in earnings become more likely. Thus, while the dispersion of shocks does not increase, shocks become more left-skewed and, hence, risky during recessions. Second, to study between-group differences, we group individuals based on several observable characteristics at the time a recession hits. One of these characteristics—the average earnings of an individual at the beginning of a business cycle episode—proves to be an especially good predictor of fortunes during a recession: prime-age workers that enter a recession with high average earnings suffer substantially less compared with those who enter with low average earnings (which is not the case during expansions). Finally, we find that the cyclical nature of earnings risk is dramatically different for the top 1 percent compared with all other individuals—even relative to those in the top 2 to 5 percent.
Stichwort: Idiosyncratic shocks, Factor structure, Countercyclical income risk, Skewness, and Administrative data Fach: E32 - Business Fluctuations; Cycles, E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, J31 - Wage Level and Structure; Wage Differentials, and J21 - Labor Force and Employment, Size, and Structure
Creator: Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 230 Abstract:
An overlapping generations model is developed that contains labor markets in which adverse selection problems arise. As a response to these problems, quantity rationing of labor occurs. In addition, the model is capable of generating (a) random employment and prices despite the absence of underlying uncertainty in equilibrium; (b) a statistical (nondegenerate) Phillips curve; (c) procyclical movements in productivity; (d) correlations between aggregate demand and unemployment (and output); (e) an absence of correlation between unemployment (employment) and real wages. In addition, the Phillips curve obtained typically has the "correct" slope. Finally, the model reconciles the theoretical importance and observed unimportance of intertemporal substitution effects, and explains why price level stability may be a poor policy objective.
Stichwort: Philips curve, Prices, Labor, Productivity, Money, and Unemployment Fach: E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, E12 - General Aggregative Models: Keynes; Keynesian; Post-Keynesian, and E32 - Business Fluctuations; Cycles