Publications:

"The Ins and Outs of Cyclical Unemployment," with Ryan Michaels, and Gary Solon. American Economic Journal: Macroeconomics, Vol. 1, No.1 (January 2009), pp. 84–110. Click here for paper. Older version also available as NBER Working Paper No. 12853.

"Evaluating the Economic Significance of Downward Nominal Wage Rigidity." Journal of Monetary Economics, Vol. 56, Issue 2 (March 2009), pp. 154-169. Click here for paper. Older version also available as NBER Working Paper No. 12611.

Working Papers:

"Stepping off the Wage Escalator: The Effects of Wage Growth on Equilibrium Employment," with Matthew Shapiro. Click here for paper. Also available as NBER Working Paper No. w15117.

This paper emphasizes the role of wage growth in shaping work incentives. It provides an analytical framework for labor supply in the presence of a return to labor market experience and aggregate productivity growth. A key finding of the theory is that there is an interaction between these two forms of wage growth that explains why aggregate productivity growth can affect employment rates in steady state. The model thus speaks to an enduring puzzle in macroeconomics by uncovering a channel from the declines in trend aggregate wage growth that accompanied the productivity slowdown of the 1970s to persistent declines in employment.
The paper also shows that the return to experience for high school dropouts has fallen substantially since the 1970s, which further contributes to the secular decline in employment rates. Taken together, the mechanisms identified in the paper can account for all of the increase in nonemployment among white male high school dropouts from 1968 to 2006. For all white males, it accounts for approximately one half of the increase in the aggregate nonemployment rate over the same period.

"Unemployment Dynamics in the OECD," with Bart Hobijn, and Aysegul Sahin. Click here for paper. Also available as NBER Working Paper No. w14617.

We provide a set of comparable estimates for the rates of inflow to and outflow from unemployment for fourteen OECD economies using publicly available data. We then devise a method to decompose changes in unemployment into contributions accounted for by changes in inflow and outflow rates for cases where unemployment deviates from its flow steady state, as it does in many countries. Our decomposition reveals that fluctuations in both inflow and outflow rates contribute substantially to unemployment variation within countries. For Anglo-Saxon economies we find approximately a 20:80 inflow/outflow split to unemployment variation, while for Continental European countries, we observe much closer to a 50:50 split. Using the estimated flow rates we compute gross worker flows into and out of unemployment. In all economies we observe that increases in inflows lead increases in unemployment, whereas outflows lag a ramp up in unemployment.

"Marginal Jobs, Heterogeneous Firms, & Unemployment Flows," with Ryan Michaels. Click here for latest version of paper. Older version available as NBER Working Paper No. 13777.

Much recent research has sought to explain the cyclical amplitude of unemployment fluctuations in the US. A common solution has been to make the unconventional assumption of rigidity in the wages of newly hired workers. This paper shows that amplification of the cyclical variation of unemployment can be obtained from adding two very conventional features to a simple model of the aggregate labor market, namely downward sloped short run labor demand and endogenous job destruction. This generalized model is able to more closely match the cyclicality of both job finding and employment to unemployment flows observed in US data. Contrary to the standard search model, the generalized model can match the data whilst maintaining realistic surplus to employment relationships. In addition, we uncover a novel source of amplification of cyclical shocks that is generated by the interaction of countercyclical unemployment inflows and job creation.

"Irreversible Investment: A Simplified Approach and an Economic Interpretation," Click here for paper.

This paper provides two contributions to the economics of irreversibility. First, it demonstrates that the optimal investment policy in the presence of costly reversibility can be derived using the familiar priniciples of discrete time dynamic programming as an alternative to the less familiar methods of smooth pasting. In doing so, it opens the analysis of irreversible investment to a wider audience of economists. Second, it shows that the discrete time approach to the optimal investment problem developed in the paper naturally admits a clean economic interpretation of the optimal investment policy of a firm that has not been recognized in previous literature.