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Summary

The Consistent Recovery of US Economy from Every Previous Recession in the Past 70 Years
Author(s):
Robert E. Hall, Stanford University and NBER
Marianna Kudlyak, Federal Reserve Bank of San Francisco
Discussant(s):
Robert Shimer, University of Chicago and NBER
Ayşegül Şahin, University of Texas at Austin and NBER
Abstract:

It is a remarkable fact about the historical US business cycle that, after unemployment reached its peak in a recession, and a recovery began, the annual reduction in the unemployment rate was stable at close to one tenth of the current level of unemployment. For example, when the unemployment rate was 7 percent at the beginning of a year, the unemployment rate fell by 0.7 percentage points during the year. The economy seems to have had an irresistible force toward restoring full employment. There was high variation in monetary and fiscal policy, and in productivity and labor-force growth during the recoveries, but little variation in the rate of decline of unemployment. Hall and Kudlyak explore models of the labor market's self-recovery that imply gradual working off of unemployment following a recession shock. These models explain why the recovery of market-wide unemployment is so much slower than the rate at which individual unemployed workers find new jobs. The reasons include the fact that the path that individual job-losers follow back to stable employment often includes several brief interim jobs, sometimes separated by time out of the labor force. Hall and Kudlyak show that the evolution of the labor market involves more than the direct effect of persistent unemployment of job-losers from the recession shock--unemployment during the recovery is elevated for people who did not lose jobs during the recession.

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Secular Changes in Employment of Older Individuals
Author(s):
Richard Rogerson, Princeton University and NBER
Johanna Wallenius, Stockholm School of Economics
Discussant(s):
Nir Jaimovich, University of Zurich
Mark Bils, University of Rochester and NBER
Abstract:

A recent literature has highlighted the dramatic changes in the employment rates of males aged 55-64 in the OECD over the last 5 decades. The average employment rate decreased by more than 15 percentage points between the mid-1970s and the mid-1990s, only to increase by roughly the same amount subsequently. One proposed explanation in the literature is that spousal non-working times are complements and that older males are working longer as a result of secular increases in labor supply of older females. In the first part of this paper Rogerson and Wallenius present evidence against this explanation. In the second part of this paper they offer a new narrative to understand the employment rate changes for older males. By exploiting the heterogeneity of experiences across OECD countries the researchers argue that the dramatic U-shaped pattern for older male employment rates should be understood as reflecting a mean reverting low frequency shock to labor market opportunities for all workers in combination with country specific policy responses that incentivized older individuals to withdraw from market work.

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From Mancession to Shecession: Women's Employment in Regular and Pandemic Recessions
Author(s):
Titan Alon, University of California at San Diego
Sena Coskun, University of Mannheim
Matthias Doepke, Northwestern University and NBER
David Koll, University of Mannheim
Michèle Tertilt, University of Mannheim
Discussant(s):
Laura Pilossoph, Federal Reserve Bank of New York
Loukas Karabarbounis, University of Minnesota and NBER
Abstract:

Alon, Coskun, Doepke, Koll, and Tertilt examine the impact of the global recession triggered by the Covid-19 pandemic on women's versus men's employment. Whereas recent recessions in advanced economies usually had a disproportionate impact on men's employment, giving rise to the moniker "mancessions," they show that the pandemic recession of 2020 was a "shecession" in most countries with larger employment declines among women. Alon, Coskun, Doepke, Koll, and Tertilt examine the causes behind this pattern using micro data from several national labor force surveys, and show that both the composition of women's employment across industries and occupations as well as increased childcare needs during closures of schools and daycare centers made important contributions. While many countries exhibit similar patterns, the researchers also emphasize how policy choices such as furloughing policies and the extent of school closures shape the pandemic's impact on the labor market. Another notable finding is the central role of telecommuting: gender gaps in the employment impact of the pandemic arise almost entirely among workers who are unable to work from home. Nevertheless, among telecommuters a different kind of gender gap arises: women working from home during the pandemic spent more work time also doing childcare and experienced greater productivity reductions than men. Alon, Coskun, Doepke, Koll, and Tertilt discuss what their findings imply for gender equality in a post-pandemic labor market that will likely continue to be characterized by pervasive telecommuting.

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Climate Change Uncertainty Spillover in the Macroeconomy
Author(s):
Michael Barnett, Arizona State University
William Brock, University of Wisconsin
Lars P. Hansen, University of Chicago and NBER
Discussant(s):
Mar Reguant, Northwestern University and NBER
Per Krusell, Stockholm University and NBER
Abstract:

The design and conduct of climate change policy necessarily confronts uncertainty along multiple fronts. Barnett, Brock, and Hansen explore the consequences of ambiguity over various sources and configurations of models that impact how economic opportunities could be damaged in the future. They appeal to decision theory under risk, model ambiguity and misspecification concerns to provide an economically motivated approach to uncertainty quantification. Barnett, Brock, and Hansen show how this approach reduces the many facets of uncertainty into a low dimensional characterization that depends on the uncertainty aversion of a decision maker or fictitious social planner. In their computations, the researchers take inventory of three alternative channels of uncertainty and provide a novel way to assess them. These include i) carbon dynamics that capture how carbon emissions impact atmospheric carbon in future time periods; ii) temperature dynamics that depict how atmospheric carbon alters temperature in future time periods; iii) damage functions that quantify how temperature changes diminish economic opportunities. Barnett, Brock, and Hansen appeal to geoscientific modeling to quantify the first two channels. They show how these uncertainty sources interact for a social planner looking to design a prudent approach to the social pricing of carbon emissions.

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This paper was distributed as Working Paper 29064, where an updated version may be available.

Converging to Convergence
Author(s):
Michael Kremer, University of Chicago and NBER
Jack Willis, Columbia University and NBER
Yang You, The University of Hong Kong
Discussant(s):
Rohini Pande, Yale University and NBER
Daron Acemoglu, Massachusetts Institute of Technology and NBER
Abstract:

Neoclassical theory predicts convergence towards steady-state income, determined by policies, institutions, and culture. Empirical tests of convergence in the 1990s found that conditioning on such correlates of growth mattered: unconditionally the norm was divergence, if anything. Kremer, Willis, and You these empirical tests of convergence with 25 years of additional data. While the recent literature on institutions emphasizes historical origins and persistence, the researchers find substantial change. First, there has been a trend towards unconditional convergence since 1990, leading to convergence since 2000, driven both by faster catch-up growth and slower growth at the frontier. Second, many of the correlates of growth and income - human capital, policies, institutions, and culture - have converged substantially in the same period, in the direction associated with higher income. Third, the slopes of cross-sectional correlate-income relationships have largely remained stable, but their intercepts have changed, so that income change alone explains little of the changes in correlates. Fourth, the growth-correlate slopes - the coefficients of growth regressions - have remained stable for the Solow fundamentals (investment rate, population growth, and human capital) but have shrunk substantially for short-run correlates, such as tax rates, government spending, and democracy scores, and to a lesser extent also for long-run correlates, such as historical institutions, geography, and culture. As such, unconditional convergence has converged towards conditional convergence.

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Participants

Elena Afanasyeva, Federal Reserve Board
Michelle Alexopoulos, University of Toronto
David Andolfato, Federal Reserve Bank of St. Louis
Nicolas Caramp, University of California at Davis
John Lipsky, Johns Hopkins University
Rhys Mendes, Bank of Canada
Laura C. Murphy, Northwestern University
Abdoulaye Ndiaye, New York University
Jing Yang, Bank of Canada
Eran Yashiv, Tel Aviv University

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