NBER Working Papers by Marcus Hagedorn

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Working Papers

May 2016Interpreting Recent Quasi-Experimental Evidence on the Effects of Unemployment Benefit Extensions
with Iourii Manovskii, Kurt Mitman: w22280
We critically review recent methodological and empirical contributions aiming to provide a comprehensive assessment of the effects of unemployment benefit extensions on the labor market and attempt to reconcile their apparently disparate findings. We describe two key challenges facing these studies - the endogeneity of benefit durations to labor market conditions and isolating true effects of actual policies from agents' responses to expectations of future policy changes. Marinescu (2015) employs a methodology that does not attempt to address these challenges. A more innovative approach in Coglianese (2015) and Chodorow-Reich and Karabarbounis (2016) attempts to overcome these challenges by exploiting a sampling error in unemployment rates as an exogenous variation. Unfortunately, we find...
January 2015The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?
with Iourii Manovskii, Kurt Mitman: w20884
We measure the aggregate effect of unemployment benefit duration on employment and the labor force. We exploit the variation induced by Congress' failure in December 2013 to reauthorize the unprecedented benefit extensions introduced during the Great Recession. Federal benefit extensions that ranged from 0 to 47 weeks across U.S. states were abruptly cut to zero. To achieve identification we use the fact that this policy change was exogenous to cross-sectional differences across U.S. states and we exploit a policy discontinuity at state borders. Our baseline estimates reveal that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.019 log points. In levels, 2.1 million individuals secured employment in 2014 due to the benefit cut. More than 1.1 mi...
October 2013Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects
with Fatih Karahan, Iourii Manovskii, Kurt Mitman: w19499
Equilibrium labor market theory suggests that unemployment benefit extensions affect unemployment by impacting both job search decisions by the unemployed and job creation decisions by employers. The existing empirical literature focused on the former effect only. We develop a new methodology necessary to incorporate the measurement of the latter effect. Implementing this methodology in the data, we find that benefit extensions raise equilibrium wages and lead to a sharp contraction in vacancy creation, employment, and a rise in unemployment.
December 2012Identifying Equilibrium Models of Labor Market Sorting
with Tzuo Hann Law, Iourii Manovskii: w18661
Does the market allocate the right workers to the right jobs? Since observable (to economists) variables account for only a small fraction of the wage variance in the data, to answer this question it is essential to study assortative matching between employers and employees based on their unobserved characteristics. This paper enables this line of research. We show theoretically that all parameters of the classic model of sorting based on absolute advantage in Becker (1973) with search frictions can be identified using only matched employer-employee data on wages and labor market transitions. In particular, these data are sufficient to assess whether matching between workers and firms is assortative, whether sorting is positive or negative, and to measure the potential effect on output fro...

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