Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market • Farber • Valletta • 2013-09
In response to the Great Recession and sustained labor market downturn, the availability of unemployment insurance (UI) benefits was extended to new historical highs in the United States, up to 99 weeks as of late 2009 into 2012. We exploit variation in the timing and size of UI benefit extensions across states to estimate the overall impact of these extensions on unemployment duration, comparing the experience with the prior extension of benefits (up to 72 weeks) during the much milder downturn in the early 2000s. Using monthly matched individual data from the U.S. Current Population Survey (CPS) for the periods 2000-2005 and 2007-2012, we estimate the effects of UI extensions on unemployment transitions and duration. We rely on individual variation in benefit availability based on the duration of unemployment spells and the length of UI benefits available in the state and month, conditional on state economic conditions and individual characteristics. We find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment arising from both sets of UI extensions. The effect on exits and duration is primarily due to a reduction in exits from the labor force rather than a decrease in exits to employment (the job finding rate). The magnitude of the overall effect on exits and duration is similar across the two episodes of benefit extensions. Although the overall effect of UI extensions on exits from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term.
Downward Nominal Wage Rigidities Bend the Phillips Curve • Daly • Hobijn • 2013-08
We show that the existence of downward nominal wage rigidities bends the short-run wage Phillips curve. We introduce a model of monetary policy with downward nominal wage rigidities and show that both the slope and curvature of the Phillips curve depend on the level of inflation and the extent of downward nominal wage rigidities. This is true for the both the long-run and the short-run Phillips curve. Comparing simulation results from the model with data on U.S. wage changes since the onset of the Great Recession, we show that downward nominal wage rigidities have likely played a role in shaping the dynamics of unemployment and wage growth from 2006 through 2012.
Estimating Shadow-Rate Term Structure Models with Near-Zero Yields • Christensen • Rudebusch • 2013-07
Standard Gaussian term structure models have often been criticized for not ruling out negative nominal interest rates, but this flaw has been especially conspicuous with interest rates near zero in many countries. We provide a tractable means to estimate an alternative Gaussian shadow-rate dynamic term structure model that enforces the zero lower bound on bond yields. We illustrate this model by estimating one-, two-, and three-factor shadow-rate models on a sample of positive and near-zero Japanese bond yields. We find that the level of the shadow rate is sensitive to model fit and specification, including the number of factors employed.
Persistence of Regional Inequality in China • Candelaria • Daly • Hale • 2013-06
On the Importance of the Participation Margin for Market Fluctuations • Elsby • Hobijn • Şahin • 2013-05
Price Setting in an Innovative Market • Copeland • Shapiro • 2013-04
House Prices, Expectations, and Time-Varying Fundamentals • Gelain • Lansing • 2013-03
Monetary Regime Change and Business Cycles • Curdia • Finocchiaro • 2013-02
Rare Shocks, Great Recessions • Curdia • Del Negro • Greenwald • 2013-01
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