We use high-frequency administrative data from Germany to study the effects of monetary policy on income and employment across the earnings distribution. Earnings growth at the bottom of the distribution is substantially more elastic to policy shocks. This unequal incidence is driven by...

Using micro-level data, we document a systematic, income-related component in household income forecast errors. We show that these errors can be formalized by a modest deviation from rational expectations, where agents overestimate the persistence of their income process. We then investigate the...

We analyse life-cycle saving decisions when households use simple heuristics, or rules of thumb, rather than solve the underlying intertemporal optimization problem. We simulate life-cycle saving decisions using three simple rules and compute utility losses relative to the solution of the...

We use an analytically tractable heterogeneous-agent (HANK) version of the standard New Keynesian model to show how the size of fiscal multipliers depends on (i) the distribution of factor incomes, and (ii) the source of nominal rigidities. With sticky prices but flexible wages, the standard...

We exploit a policy discontinuity at U.S. state borders to identify the effects of unemployment insurance policies on unemployment. Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of...

Countercyclical unemployment benefit extensions in the United States act as a propagation mechanism, contributing to both the high persistence of unemployment and its weak correlation with productivity. We show this by modifying an otherwise standard frictional model of the labor market to...

We develop a method to jointly measure the response of worker search effort (individual effect) and vacancy creation (market-level effect) to changes in the duration of unemployment insurance (UI) benefits. To implement this approach, we exploit an unexpected cut in UI durations in Missouri and...

How should unemployment benefits vary in response to the economic crisis induced by the COVID-19 pandemic? We answer this question by computing the optimal unemployment insurance response to the COVID-induced recession.We compare the optimal policy to the provisions under the CARES Act—which...

Economic analysis of effective policies for managing epidemics requires an integrated economic and epidemiological approach. We develop and estimate a spatial, micro-founded model of the joint evolution of economic variables and the spread of an epidemic. We empirically discipline the model...

We develop a method to jointly measure the response of worker search effort (individual effect) and vacancy creation (market-level effect) to changes in the duration of unemployment insurance (UI) benefits. To implement this approach, we exploit an unexpected cut in UI durations in Missouri and...