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Research
Publications
More on Unemployment and Vacancy Fluctuations (with Dale Mortensen)
Review of Economic Dynamics, 10 (3), pp. 327-347, 2007.
[PDF]
(an earlier version was circulated as NBER Working Paper No. 11692)
Learning-by-Doing Versus Learning About Match Quality: Can We Tell Them Apart?
Review of Economic Studies, 74 (2), pp. 537-566, 2007.
[PDF]
Labor-Market Volatility in Matching Models with Endogenous Separations
(with Dale Mortensen)
Scandinavian Journal of Economics, 109 (4), pp. 645-665, 2008.
[PDF]
What Can We Learn About Firm Recruitment from the Job Openings and Labor Turnover Survey?
Producer Dynamics: New Evidence from Micro Data (Timothy Dunne, J. Bradford Jensen, and Mark J. Roberts, editors)
University of Chicago Press, forthcoming
Comment on ‘Volatility and Dispersion in Business Growth Rates: Publicly-Traded versus Privately-Held Firms’.
NBER Macroeconomics Annual, 21 (1), pp. 167-179, 2006.
[PDF]
Amplification of Productivity Shocks: Why Don’t Vacancies Like to Hire the Unemployed?
Structural Models of Wage and Employment Dynamics, vol. 275 of ‘Contributions to Economic Analysis’,
ed. H. Bunzel, B. J. Christensen, G. R. Neumann, and J.-M. Robin, pp. 481-506. Amsterdam: Elsevier, 2006.
The Evolution of U.S. Earnings Inequality: 1961 - 2002 (with Zvi Eckstein)
Federal Reserve Bank of Minneapolis Quarterly Review, 28 (2), pp. 10-29. December 2004.
[PDF]
Webpage containing paper, data set, graphs
[Link]
Comment on ‘Business Cycle and the Life Cycle’.
NBER Macroeconomics Annual, 19 (1), pp. 462-477, 2004.
[PDF]
Working Papers
On the Extent of Job-to-Job Transitions
The Effect of Quits on Worker Recruitment: Theory and Evidence
Labor-Market Fluctuations and On-the-Job Search
Worker Reallocation over the Business Cycle: The Importance of
Employer-to-Employer Transitions
The Cost of and Political Support for Employment Protection in the Presence of Match-Specific Learning
Learning Capital and the Lack Thereof: Why Low-Skilled Workers are More Likely to Become Unemployed
Optimal Application Behavior with Incomplete Information
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On the Extent of Job-to-Job Transitions
Abstract:
The rate of job-to-job transitions is twice as large today as the rate at which workers
move from employment to unemployment. I demonstrate that, under plausible
specifications, the basic job-ladder model --- the workhorse model of the literature on
on-the-job search -- has no chance of matching the extent of job-to-job transitions.
Moreover, it cannot account for the low search effort exerted by most employed workers
and the observation that on-the-job search is a means to "escape" unemployment:
it is undertaken exactly by those workers who are facing the threat of becoming unemployed.
I develop an alternative theoretical framework that can quantitatively match salient
features of job-to-job transitions. The model incorporates a stochastic process that
causes the value of a job to the worker to decrease at times, predicting that workers
with a lower job value have a higher probability of entering unemployment. This
natural feature is not in standard models. A second important element of the model is
endogenous search effort, explaining the low search effort exerted by many employed
workers and the correlation between search effort and the probability of becoming
unemployed observed in the data. Calculating the equilibrium of the model shows
that it can successfully account for the stylized facts on job-to-job transitions. I also
demonstrate that the model can account for observed differences in the extent of
job-to-job transitions across demographic groups.
September 2005 version of the paper
[PDF]
The Effect of Quits on Worker Recruitment: Theory and Evidence (with Jason Faberman)
A revised version of this paper is coming soon.
Labor-Market Fluctuations and On-the-Job Search
Under review
Abstract:
This paper argues that a model of the aggregate labor market that incorporates
the observed extent of job-to-job transitions can explain all the cyclical volatility
in vacancy and unemployment rates in U.S. data in response to shocks of the observed
magnitude. The key to this result is the complementarity between on-the-job search
and costly hiring that leads employers to expect a higher payoff from recruiting
employed searchers. This higher expected payoff explains why firms recruit more when
the number of employed searchers is high during periods of low unemployment.
November 2007 version of the paper
[PDF]
Worker Reallocation over the Business Cycle: The Importance of
Employer-to-Employer Transitions
Under review
Abstract: In this paper, I show that employer-to-employer transitions are not only pervasive
in the U.S. labor market, making up 49% of all separations from employers over
the past decade, but also are a critical component in understanding worker turnover over
the business cycle. In fact, the shift in the composition of separations from employer-toemployer
transitions to employment-to-unemployment transitions explains all of the rise in
the incidence of unemployment during the 2001 recession. In addition, the contribution of
the change in the employer-to-employer transition probability to unemployment volatility
was almost as large as that of the change in the job-finding probability.
A parsimonious model of worker turnover with on-the-job search and stochastic unemployment
risk can explain the cyclical features of employer-to-employer transitions in response
to the observed variation in the job-finding probability. The model also can account for all
of the rise in unemployment incidence without any change in the separation hazard faced
by different jobs, although it cannot fully explain the speed of the rise.
March 2008 version of the paper
[PDF]
The Cost of and Political Support for Employment Protection in the Presence of Match-Specific Learning
Abstract: This paper studies the effects of the introduction of employment
protection policies that raise the costs of dismissal. Macroeconomists studying these
policies have thus far focused primarily on their effect on the flexibility of firms in adjusting their
employment. This study highlights that in the presence of worker heterogeneity and
match-specific learning, these policies have an important effect on average productivity
by influencing productivity as a function of tenure and the tenure distribution of employed
workers. Moreover, this productivity effect is different depending on the nature
of the learning process that is the source of productivity gains with tenure, whether it
entails learning-by-doing or learning about match quality. Using structural estimates
from a previous study that imply that learning about match quality is the dominant
learning process, I show that by hindering experimentation in the economy, the imposition
of dismissal costs reduces average productivity by 3:2%. Moreover, I show
that even if the first-best policy of removing these dismissal costs completely is not
available, removing dismissal costs for low-tenure workers through the liberalization of
the use of fixed-term contracts can undo most of the above productivity loss.
This latter result is particularly important given my finding that, in a political
equilibrium given one-time majority voting, the complete removal of dismissal costs would
not be supported, while the liberalization of fixed-term contracts would be supported.
April 2002 version of the paper
[PDF]
Learning Capital and the Lack Thereof: Why Low-Skilled Workers are More Likely to Become Unemployed
Abstract: The unemployment rate of low-skilled workers is consistently higher and more
volatile than that of high-skilled ones. This paper develops a matching model that
explains these findings by positing that matches between high-skilled workers and
employers are more valuable because there is a potential for substantial amount of learning
capital to develop over time. Such learning capital exists because the matching process
rejects bad matches between high-skilled workers and employers only partially,
due to the complexity of the factors determining the quality of the match. The lack
of such learning capital for low-skilled workers makes their employment relationships
more vulnerable to adverse shocks.
Optimal Application Behavior with Incomplete Information
Abstract: This paper studies the application behavior of agents in an environment where
agents with different underlying qualities but with identical preferences are competing
for placements (in colleges, on sports teams, etc) and are allowed to submit multiple
applications. Two aspects of incomplete information are considered that make the
application behavior in these environments an interesting decision problem to study:
uncertainty about one’s own quality and noise in the evaluation of applications. First,
I consider what happens when agents face uncertainty about their own quality (interpreted
as their ranking among the pool of applicants), need to form beliefs about their
quality and make applications based on these beliefs. I show that with a fixed number
of applications, given that the distribution characterizing the belief of the agents
satisfies the monotone likelihood ratio property (MLRP), there is assortative matching
on the expected quality of the agent in the sense that all applications are increasing
in the expected quality of the agent. When agents are allowed to decide how many
applications to submit given some application cost, however, this result breaks down.
It is possible to characterize the optimal application behavior locally and in the limit,
but the optimal number of applications shows no regularity globally. I show that,
even if MLRP holds, it is possible for an agent with a better underlying quality and a
better mean belief to secure a worse placement, something that is not possible with a
fixed number of applications. I also show that the number of applications — for high
enough dispersion — is decreasing in the dispersion of beliefs, and for sufficiently high
dispersion, agents submit no application or submit a single application for the best
placement.
Second, I study what happens when in the environment studied a random element
is added to the evaluation of applications. I show that agents with low dispersion
in their beliefs are the ones to submit multiple applications. The results thus show
that both aspects of incomplete information imply that agents facing more uncertainty
about their own quality submit fewer applications, and hence secure worse placements.
In a companion paper I embed the application decision of the agents into a general
equilibrium model of college applications where colleges optimally chose which students
to admit, and study the properties of its equilibrium.
May 2004 version of the paper
[PDF]
This page was last updated on January 3, 2008
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