Labor markets are characterized by large heterogeneity in job stability. Some workers hold lifetime jobs, whereas others cycle repeatedly in and out of employment. This paper explores the economic consequences of such heterogeneity. Using Survey of Consumer Finances (SCF) data, we document a...

This article analyzes the behavioral effects of unemployment benefits (UB) and it characterizes their optimal level when jobless people, who can carry out a subsistence activity, only survive if they have access to a minimum consumption level. Our model shows that if the level of UB is low...

We extend the canonical income process with persistent and transitory risk to shock distributions with left-skewness and excess kurtosis, to which we refer as higher-order risk. We estimate our extended income process by GMM for household data from the United States. We find countercyclical...

We identify the causal effect of lump-sum severance payments on non-employment duration in Norway by exploiting a discontinuity in eligibility at age 50. We find that a severance payment worth 1.2 months' earnings at the median lowers the fraction re-employed after a year by seven percentage...

Motivated by the apparent failure of the credit multiplier mechanism (CM) to deliver amplification in DSGE models, we re-examine its role in business cycles to address the question: is something wrong with the CM? Our answer is no. In coming to this answer we construct a model with reproducible...

Using an intertemporal model of saving and capital accumulation we demonstrate that it is impossible for any binding minimum wage to increase the after-tax incomes of workers if the production function is Cobb-Douglas with constant returns to scale, or if there are no differences in ability...

Using an intertemporal model of saving and capital accumulation with two types of agents (workers and capitalists) we demonstrate that it is impossible for any binding minimum wage to increase the after-tax incomes of workers if the production function is Cobb-Douglas with constant returns to...

This paper analyses the smoothing of asymmetric shocks to output for a sample of OECD countries. It also examines whether the private capital markets will be able to replace the government in providing output smoothing in the euro-area, in the near future. The research finds no evidence of large...

This paper analyzes long run outcomes resulting from adopting a binding minimum wage in a neoclassical model with perfectly competitive labour markets and capital accumulation. The model distinguishes between workers of heterogeneous ability and capitalists who do all the saving, and it entails...

We analyze optimal monetary policy and its implications for asset prices, when aggregate demand has inertia and responds to asset prices with a lag. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (asset prices are initially pushed above their...