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This Time It's Different: The Role of Women's Employment in a Pandemic Recession
Titan Alon, University of California at San Diego
Matthias Doepke, Northwestern University and NBER
Jane Olmstead-Rumsey, Northwestern University
Michèle Tertilt, University of Mannheim
Stefania Albanesi, University of Pittsburgh and NBER

In recent US recessions, employment losses have been much larger for men than for women. Yet, in the current recession caused by the Covid-19 pandemic, the opposite is true: unemployment is higher among women. In this paper, we analyze the causes and consequences of this phenomenon. We argue that women have experienced sharp employment losses both because their employment is concentrated in heavily affected sectors such as restaurants, and due to increased childcare needs caused by school and daycare closures, preventing many women from working. We analyze the repercussions of this trend using a quantitative macroeconomic model featuring heterogeneity in gender, marital status, childcare needs, and human capital. Our quantitative analysis suggests that a pandemic recession will i) feature a strong transmission from employment to aggregate demand due to diminished within-household insurance; ii) result in a widening of the gender wage gap throughout the recovery; and iii) contribute to a weakening of the gender norms that currently produce a lopsided distribution of the division of labor in home work and childcare.


This paper was distributed as Working Paper 27660, where an updated version may be available.

How the Wealth Was Won: Factor Shares as Market Fundamentals
Daniel Greenwald, Massachusetts Institute of Technology
Martin Lettau, University of California, Berkeley and NBER
Sydney C. Ludvigson, New York University and NBER
Andrea L. Eisfeldt, University of California, Los Angeles and NBER

Why do stocks rise and fall? From the beginning of 1989 to the end of 2017, $34 trillion of real equity wealth (2017:Q4 dollars) was created by the U.S. corporate sector. Greenwald, Lettau, and Ludvigson estimate that 43% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, virtually all of which came at the expense of labor compensation. Economic growth accounted for just 25%, followed by a lower risk premium (24%), and lower interest rates (8%). From 1952 to 1988 less than half as much wealth was created, but economic growth accounted for more than 100% of it.

Efficient Redistribution
Corina Boar, New York University and NBER
Virgiliu Midrigan, New York University and NBER
Dirk Krueger, University of Pennsylvania and NBER

Boar and Midrigan ask: what are the most efficient means of redistribution in an unequal society? Boar and Midrigan answer this question by characterizing the optimal shape of non-linear income and wealth taxes in a dynamic general equilibrium model with uninsurable idiosyncratic risk. Their analysis reproduces the distribution of income and wealth in the United States and explicitly takes into account the long-lived transition dynamics after policy reforms. The researchers find that a uniform flat tax on capital and labor income combined with a lump-sum transfer is nearly optimal. Though taxing wealth and allowing for increasing marginal income tax schedules raises utilitarian welfare, the incremental gains from doing so are small. This result is robust to changing household preferences, the distribution of ability, the planner's preference for redistribution, as well as to explicitly modeling private business ownership and the ensuing heterogeneity in rates of return across financially constrained entrepreneurs.


This paper was distributed as Working Paper 27622, where an updated version may be available.

Real-Time Economics: A New Public Platform to Analyze the Impacts of COVID-19 and Macroeconomic Policies Using Private Sector Data
Raj Chetty, Harvard University and NBER
John N. Friedman, Brown University and NBER
Nathaniel Hendren, Harvard University and NBER
Michael Stepner, Harvard University
Erik Hurst, University of Chicago and NBER

Chetty, Friedman, Hendren, and Stepner build a publicly available platform that tracks economic activity at a granular level in real time using anonymized data from private companies. They report daily statistics on consumer spending, business revenues, employment rates, and other key indicators disaggregated by ZIP code, industry, income group, and business size. Using these data, The researchers study the mechanisms through which COVID-19 affected the economy by analyzing heterogeneity in its impacts. Chetty, Friedman, Hendren, and Stepner first show that high-income individuals reduced spending sharply in mid-March 2020, particularly in areas with high rates of COVID-19 infection and in sectors that require physical interaction. This reduction in spending greatly reduced the revenues of businesses that cater to high-income households in person, notably small businesses in affluent ZIP codes. These businesses laid off most of their low-income employees, leading to a surge in unemployment claims in affluent areas. Building on this diagnostic analysis, the researchers use event study designs to estimate the causal effects of policies aimed at mitigating the adverse impacts of COVID-19. State-ordered reopenings of economies have small impacts on spending and employment. Stimulus payments to low-income households increased consumer spending sharply, but very little of this increased spending flowed to businesses most affected by the COVID-19 shock, dampening its impacts on employment. Paycheck Protection Program loans increased employment at small businesses modestly, by approximately 3%, implying a cost per job saved in excess of $200,000. These results suggest that traditional macroeconomic tools – stimulating aggregate demand or providing liquidity to businesses – have diminished capacity to restore employment when consumer spending is constrained by health concerns. During a pandemic, it may be more fruitful to mitigate economic hardship through social insurance. More broadly, this analysis shows how public statistics can be constructed from private sector data to support many research and policy analyses without compromising privacy, providing a new tool for real time empirical macroeconomics.

Effective Demand Failures and the Limits of Monetary Stabilization Policy
Michael Woodford, Columbia University and NBER
Guido Lorenzoni, Northwestern University and NBER

The COVID-19 pandemic presents a challenge for stabilization policy that is different from those resulting from either "supply" or "demand" shocks that similarly affect all sectors of the economy, owing to the degree to which the necessity of temporarily
suspending some (but not all) economic activities disrupts the circular flow of payments, resulting in a failure of what Keynes (1936) calls "effective demand." In such a situation, economic activity in many sectors of the economy can be much lower than would maximize welfare (even taking into account the public health constraint), and interest-rate policy cannot eliminate the distortions -- not because of a limit on the extent to which interest rates can be reduced, but because monetary stimulus fails to stimulate demand of the right sorts. Fiscal transfers are instead well-suited to addressing the fundamental problem, and can under certain circumstances achieve a first-best allocation of resources without any need for a monetary policy response.


This paper was distributed as Working Paper 27768, where an updated version may be available.


Laura Castillo-Martinez, Duke University
Laurent Cavenaile, University of Toronto
Tom Holden, Deutsche Bundesbank
Baris Kaymak, University of Montreal
Clara Martínez-Toledano, Paris School of Economics
Alvaro Ortiz, BBVA Research
Diego Ramos-Toro, Dartmouth College
Jose Rodriguez Mora, University of Edinburgh
Choongryul Yang, Federal Reserve Board

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