We use direct evidence on credit constraints to study their importance for household consumption growth and for welfare. We distentangle the direct effect on consumption growth of a currently binding credit constraints from the indirect effect of a potentially binding credit constraint which...

The self-employed are a heterogeneous group. Some are self-employed because they are good at it, while others are self-employed because they cannot find a better paying salaried job. Data from the CPS for prime age males show that workers are almost twice as likely to enter self-employment from...

Economists have long emphasized the importance of expectations in determining macroeconomic outcomes Yet there has been almost no recent effort to model actual empirical expectations data; instead macroeconomists usually simply assume expectations are rational This paper shows that while...

Since the foundational work of Keynes (1936) macroeconomists have emphasized the importance of agents' expectations in determining macroeconomic outcomes Yet in recent decades macroeconomists have devoted almost no effort to modeling actual empirical expectations data instead assuming all...

We develop a dynamic general equilibrium model where workers can engage in search while on the job. We show that on-the-job search is a key component in explaining labor market dynamics in models of equilibrium unemployment. The model predicts fluctuations of unemployment, vacancies, and labor...

Using recent results in the measurement error literature, we show that the official U.S. unemployment rates substantially underestimate the true levels of unemployment, due to misclassification errors in labor force status in Current Population Surveys. Our closed-form identification of the...

This paper demonstrates that, because of declining labor force participation rates, the usual estimates of job creation needed to keep unemployment in check are too high. It is estimated that only 98,000 jobs (rather than the usual goal of 150,000 jobs) need to be created per month to absorb the...

We integrate the housing market and the labor market in a dynamic general equilibrium model with credit and search frictions. The model is confronted with the U.S. macroeconomic time series. Our estimated model can account for two prominent facts observed in the data. First, the land price and...

This paper asks how well Okun's Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okun's Law is a strong and stable relationship in most countries, one that did not change substantially during the Great Recession....