Papers
Topics
Authors
Recent
Gemini 2.5 Flash
Gemini 2.5 Flash
102 tokens/sec
GPT-4o
59 tokens/sec
Gemini 2.5 Pro Pro
43 tokens/sec
o3 Pro
6 tokens/sec
GPT-4.1 Pro
50 tokens/sec
DeepSeek R1 via Azure Pro
28 tokens/sec
2000 character limit reached

Unemployment Volatility: When Workers Pay Costs upon Accepting Jobs (2401.07423v1)

Published 15 Jan 2024 in econ.TH

Abstract: When a firm hires a worker, adding the new hire to payroll is costly. These costs reduce the amount of resources that can go to recruiting workers and amplify how unemployment responds to changes in productivity. Workers also incur up-front costs upon accepting jobs. Examples include moving expenses and regulatory fees. I establish that workers' costs lessen the response of unemployment to productivity changes and do not subtract from resources available for recruitment. The influence of workers' costs is bounded by properties of a matching function, which describes how job openings and unemployment produce hires. Using data on job finding that are adjusted for workers' transitions between employment and unemployment and for how the Job Openings and Labor Turnover Survey records hires, I estimate a bound that ascribes limited influence to workers' costs. The results demonstrate that costs paid by workers upon accepting jobs affect outcomes in the labor market (firms threaten workers with paying the up-front costs again if wage negotiations fail), but their influence on volatility is less important than firms' costs.

View on arXiv
Definition Search Book Streamline Icon: https://streamlinehq.com
References (71)
  1. Acemoglu, Daron. 2009. Introduction to Modern Economic Growth. Princeton, NJ: Princeton University Press.
  2. Amior, Michael. Forthcoming. “Education and Geographical Mobility: The Role of the Job Surplus.” American Economic Journal: Economic Policy.
  3. Andersen, Torben M. 2016. ‘‘Incentives versus insurance in the design of tax-financed unemployment insurance.” International Journal of Economic Theory 12(2): 127–150. doi:10.1111/ijet.12085. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12085.
  4. Barnichon, Regis. 2010. “Productivity and unemployment over the business cycle.” Journal of Monetary Economics 57(8): 1013–1025. ISSN 0304-3932. doi:10.1016/j.jmoneco.2010.09.006.
  5. “Shifts in the Beveridge Curve, Job Matching, and Labor Market Dynamics.” New England Economic Review Sept./Oct.: 3–19.
  6. “Accounting for Endogeneity in Matching Function Estimation.” Review of Economic Dynamics 16(3): 440–451.
  7. “A minimum-wage model of unemployment and growth: The case of a backward-bending demand curve for labor.” International Journal of Economic Theory 15(3): 297–309. doi:10.1111/ijet.12168.
  8. “Unemployment and income-distribution effects of economic growth: A minimum-wage analysis with optimal saving.” International Journal of Economic Theory 16(3): 243–259. doi:10.1111/ijet.12197.
  9. “Why is Unemployment so Countercyclical?” Tech. rep. doi:10.3386/w26723.
  10. “Why is unemployment so countercyclical?” Review of Economic Dynamics 41: 4–37. doi:10.1016/j.red.2021.04.008.
  11. “On the heterogeneous short-term effects of minimum wages on labor demand.” International Journal of Economic Theory 16(2): 184–195. doi:10.1111/ijet.12236. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12236.
  12. “Business cycles, unemployment insurance, and the calibration of matching models.” Journal of Economic Dynamics and Control 32(4): 1120–1155. ISSN 0165-1889. doi:https://doi.org/10.1016/j.jedc.2007.04.008. Available at http://www.sciencedirect.com/science/article/pii/S0165188907001200.
  13. “Job Destruction and Propagation of Shocks.” The American Economic Review 90(3): 482–498.
  14. “Occupational Licensing: A Framework for Policymakers.” July. https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf.
  15. Diamond, Peter A. 1982a. “Aggregate Demand Management in Search Equilibrium.” Journal of Political Economy 90(5): 881–894.
  16. Diamond, Peter A. 1982b. “Wage Determination and Efficiency in Search Equilibrium.” The Review of Economic Studies 49(2): 217. doi:10.2307/2297271.
  17. Duan, Naihua. 1983. “Smearing Estimate: A Nonparametric Retransformation Method.” Journal of the American Statistical Association 78(383): 605–610. doi:10.1080/01621459.1983.10478017. Available at https://www.tandfonline.com/doi/abs/10.1080/01621459.1983.10478017.
  18. Economic Sciences Prize Committee. 2010. “Markets with Search Frictions.” Scientific Background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010. Available: https://www.nobelprize.org/uploads/2018/06/advanced-economicsciences2010.pdf.
  19. “The Beveridge Curve: A Survey.” Journal of Economic Literature 53(3): 571–630.
  20. Farmer, Roger E. A. 2008. “Aggregate demand and supply.” International Journal of Economic Theory 4(1): 77–93. doi:10.1111/j.1742-7363.2007.00069.x.
  21. Flórez, Luz A. 2019. “Job search inefficiency and optimal policies in the presence of an informal sector.” International Journal of Economic Theory 15(4): 399–429. doi:10.1111/ijet.12162. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12162.
  22. “New Data Show that Roughly One-Quarter of U.S. Workers Hold an Occupational License.” https://obamawhitehouse.archives.gov/blog/2016/06/17/new-data-show-roughly-one-quarter-us-workers-hold-occupational-license. The Obama White House.
  23. “Unemployment Fluctuations with Staggered Nash Wage Bargaining.” Journal of Political Economy 117(1): 38–86.
  24. “Analyzing the Labor Market Outcomes of Occupational Licensing.” Industrial Relations: A Journal of Economy and Society 57(1): 57–100. doi:10.1111/irel.12200. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/irel.12200.
  25. “Worker search effort as an amplification mechanism.” Journal of Monetary Economics 75: 106 – 122. ISSN 0304-3932. doi:https://doi.org/10.1016/j.jmoneco.2015.02.002. Available at http://www.sciencedirect.com/science/article/pii/S0304393215000185.
  26. “The entrepreneurship Beveridge curve.” International Journal of Economic Theory 12(2): 151–165. doi:10.1111/ijet.12086. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12086.
  27. Guerrazzi, Marco. 2023. “Optimal growth with labor market frictions.” International Journal of Economic Theory doi:10.1111/ijet.12386.
  28. “The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited.” American Economic Review 98(4): 1692–1706.
  29. Hall, Robert E. 2005a. “Employment Efficiency and Sticky Wages: Evidence from Flows in the Labor Market.” Review of Economics and Statistics 87(3): 397–407. ISSN 1530-9142. doi:10.1162/0034653054638346.
  30. Hall, Robert E. 2005b. “Employment Fluctuations with Equilibrium Wage Stickiness.” American Economic Review 95(1): 50–65.
  31. Hosios, Arthur J. 1990. “On the Efficiency of Matching and Related Models of Search and Unemployment.” The Review of Economic Studies 57(2): 279–298.
  32. “Wages and the Value of Nonemployment.” The Quarterly Journal of Economics 135(4): 1905–1963. doi:10.1093/qje/qjaa016.
  33. “Is Occupational Licensing a Barrier to Interstate Migration?” American Economic Journal: Economic Policy 12(3): 347–373. doi:10.1257/pol.20170704.
  34. “Asset Prices and Unemployment Fluctuations: A Resolution of the Unemployment Volatility Puzzle.” The Review of Economic Studies 90(3): 1304–1357. doi:10.1093/restud/rdac048.
  35. “The Effect of Expected Income on Individual Migration Decisions.” Econometrica 79(1): 211–251. ISSN 0012-9682. doi:10.3982/ecta4657.
  36. Kleiner, Morris M. 2000. “Occupational Licensing.” Journal of Economic Perspectives 14(4): 189–202. doi:10.1257/jep.14.4.189. Available at https://www.aeaweb.org/articles?id=10.1257/jep.14.4.189.
  37. Kleiner, Morris M. 2006. Licensing Occupations: Ensuring Quality or Restricting Competition? W.E. Upjohn Institute. ISBN 9781429454865. doi:10.17848/9781429454865.
  38. “The Prevalence and Effects of Occupational Licensing.” British Journal of Industrial Relations 48(4): 676–687. doi:10.1111/j.1467-8543.2010.00807.x. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-8543.2010.00807.x.
  39. “Analyzing the Extent and Influence of Occupational Licensing on the Labor Market.” Journal of Labor Economics 31(S1): S173–S202. doi:10.1086/669060.
  40. “Occupational Licensing: Improving Access to Regulatory Information.” Journal of Labor Research doi:10.1007/s12122-020-09314-3.
  41. Mortgage Broker Regulations that Matter: Analyzing Earnings, Employment, and Outcomes for Consumers, 183–232. University of Chicago Press. ISBN 9780226032900. doi:10.7208/chicago/9780226032900.003.0007.
  42. “Analyzing occupational licensing among the states.” Journal of Regulatory Economics 52: 132–158.
  43. “At what co$t: State and National Estimates of the Economic Costs of Occupational Licensing.” Institute for Justice. Available: https://ij.org/report/at-what-cost/.
  44. “License to Work: A National Study of Burdens from Occupational Licensing.” Institute for Justice, https://ij.org/report/license-to-work-3/. 3rd edition.
  45. “The Fundamental Surplus.” American Economic Review 107(9): 2630–65. doi:10.1257/aer.20150233.
  46. “The fundamental surplus strikes again.” Review of Economic Dynamics 41: 38–51. doi:10.1016/j.red.2021.04.007.
  47. “The quality effect of intra-firm bargaining with endogenous worker flows.” International Journal of Economic Theory 15(2): 183–207. doi:10.1111/ijet.12164. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12164.
  48. Miller, Don M. 1984. “Reducing Transformation Bias in Curve Fitting.” The American Statistician 38(2): 124–126. doi:10.1080/00031305.1984.10483180.
  49. “Understanding Declining Fluidity in the U.S. Labor Market.” Brookings Papers on Economic Activity 183–237. ISSN 00072303, 15334465. Available at http://www.jstor.org/stable/43869023.
  50. “More on unemployment and vacancy fluctuations.” Review of Economic Dynamics 10(3): 327 – 347.
  51. “Job Creation and Job Destruction in the Theory of Unemployment.” The Review of Economic Studies 61(3): 397–415.
  52. Notowidigdo, Matthew J. 2020. “The Incidence of Local Labor Demand Shocks.” Journal of Labor Economics 38(3): 687–725. ISSN 1537-5307. doi:10.1086/706048.
  53. “Looking into the Black Box: A Survey of the Matching Function.” Journal of Economic Literature 39(2): 390–431.
  54. Labor, Credit, and Goods Markets. Cambridge, Massachusetts: The MIT Press. ISBN 9780262036450. Includes bibliographical references and index.
  55. “Solving the Diamond-Mortensen-Pissarides model accurately.” Quantitative Economics 8(2): 611–650. doi:10.3982/qe452.
  56. “Endogenous Disasters.” American Economic Review 108(8): 2212–2245. ISSN 0002-8282. doi:10.1257/aer.20130025.
  57. Pissarides, Christopher A. 1985. “Short-Run Equilibrium Dynamics of Unemployment, Vacancies, and Real Wages.” The American Economic Review 75(4): 676–690.
  58. Pissarides, Christopher A. 2000. Equilibrium Unemployment Theory. Cambridge, MA: MIT Press, 2nd ed.
  59. Pissarides, Christopher A. 2009. “The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer.” Econometrica 77(5): pp. 1339–1369. ISSN 00129682. Available at http://www.jstor.org/stable/25621364.
  60. Plotnikov, Dmitry. 2019. “Hysteresis in unemployment: A confidence channel.” International Journal of Economic Theory 15(1): 109–127. doi:10.1111/ijet.12207. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12207.
  61. “The optimal long-run earned income tax credit.” International Journal of Economic Theory 17(3): 284–308. doi:10.1111/ijet.12234. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12234.
  62. “Labor market fluctuations in the small and in the large.” International Journal of Economic Theory 5(1): 125–137. ISSN 1742-7363. doi:10.1111/j.1742-7363.2008.00097.x. Available at http://dx.doi.org/10.1111/j.1742-7363.2008.00097.x.
  63. Ryan, Rich. 2023. “Responses of Unemployment to Productivity Changes for a General Matching Technology.” https://doi.org/10.48550/arXiv.2307.05843.
  64. “Why Are Low-Skilled Workers Less Mobile? The Role of Mobility Costs and Spatial Frictions.” Annals of Economics and Statistics (142): 283. ISSN 2115-4430. doi:10.15609/annaeconstat2009.142.0283.
  65. Shimer, Robert. 2005. “The Cyclical Behavior of Equilibrium Unemployment and Vacancies.” American Economic Review 95(1): 25–49. doi:10.1257/0002828053828572. Available at http://www.aeaweb.org/articles.phpdoi=10.1257/0002828053828572.
  66. Shimer, Robert. 2010. Labor Markets and Business Cycles. Princeton: Princeton University Press.
  67. Shimer, Robert. 2012. “Reassessing the ins and outs of unemployment.” Review of Economic Dynamics 15(2): 127–148.
  68. ‘‘Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment.” Macroeconomic Dynamics 13(S1): 76–96. ISSN 1469-8056. doi:10.1017/s1365100509080122.
  69. “Measuring the Cyclicality of Real Wages: How Important is Composition Bias.” Quarterly Journal of Economics 109(1): 1–25.
  70. Tumen, Semih. 2016. “Informal versus formal search: Which yields better pay?” International Journal of Economic Theory 12(3): 257–277. doi:10.1111/ijet.12093. Available at https://onlinelibrary.wiley.com/doi/abs/10.1111/ijet.12093.
  71. Zabek, Mike. Forthcoming. “Local Ties in Spatial Equilibrium.” American Economic Journal: Macroeconomics.
User Edit Pencil Streamline Icon: https://streamlinehq.com
Authors (1)
  1. Rich Ryan (4 papers)

Summary

We haven't generated a summary for this paper yet.

Ai Sparkles Streamline Icon: https://streamlinehq.com Summarize Now
X Twitter Logo Streamline Icon: https://streamlinehq.com

Tweets