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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Pascal Michaillat

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Working Papers

July 2015The Optimal Use of Government Purchases for Macroeconomic Stabilization
with Emmanuel Saez: w21322
This paper extends Samuelson's theory of optimal government purchases by considering the contribution of government purchases to macroeconomic stabilization. We consider a matching model in which unemployment can be too high or too low. We derive a sufficient-statistics formula for optimal government purchases. Our formula is the Samuelson formula plus a correction term proportional to the government-purchases multiplier and the gap between actual and efficient unemployment rate. Optimal government purchases are above the Samuelson level when the correction term is positive-for instance, when the multiplier is positive and unemployment is inefficiently high. Our formula indicates that US government purchases, which are mildly countercyclical, are optimal under a small multiplier of 0.03. I...
January 2014An Economical Business-Cycle Model
with Emmanuel Saez: w19777
In recent decades, advanced economies have experienced low and stable inflation and long periods of liquidity trap. We construct an alternative business-cycle model capturing these two features by adding two assumptions to a money-in-the-utility-function model: the labor market is subject to matching frictions, and real wealth enters the utility function. These assumptions modify the two core equations of the standard New Keynesian model. With matching frictions, we can analyze equilibria in which inflation is fixed and not determined by a forward-looking Phillips curve. With wealth in the utility, the Euler equation is modified and we can obtain steady-state equilibria with a liquidity trap, positive inflation, and labor market slack. The model is simple enough to inspect the mechanisms b...
February 2013Aggregate Demand, Idle Time, and Unemployment
with Emmanuel Saez: w18826
This paper develops a model of unemployment fluctuations. The model keeps the architecture of the general-disequilibrium model of Barro and Grossman (1971) but takes a matching approach to the labor and product markets instead of a disequilibrium approach. On the product and labor markets, both price and tightness adjust to equalize supply and demand. Since there are two equilibrium variables but only one equilibrium condition on each market, a price mechanism is needed to select an equilibrium. We focus on two polar mechanisms: fixed prices and competitive prices. When prices are fixed, aggregate demand affects unemployment: with a higher aggregate demand, firms find more customers; this reduces the idle time of their employees and thus increases their labor demand; and this reduces unemp...

Published: Pascal Michaillat & Emmanuel Saez, 2015. "Aggregate Demand, Idle Time, and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 130(2), pages 507-569. citation courtesy of

November 2010A Macroeconomic Theory of Optimal Unemployment Insurance
with Camille Landais, Emmanuel Saez: w16526
We develop a theory of optimal unemployment insurance (UI) that accounts for workers’ job-search behavior and firms’ hiring behavior. The optimal replacement rate of UI is the conventional Baily [1978]-Chetty [2006a] rate, which solves the trade-off between insurance and job-search incentives, plus a correction term, which is positive when UI brings the labor market tightness closer to efficiency. For instance, when tightness is inefficiently low, optimal UI is more generous than the Baily-Chetty rate if UI raises tightness and less generous if UI lowers tightness. We propose empirical criteria to determine whether tightness is inefficiently high or low and whether UI raises or lowers tightness. The theory has implications for the cyclicality of optimal UI.

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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