System Working Papers

David Ratner and Jae Sim

Conventional wisdom has it that sound monetary policy since the 1980s not only conquered the Great Inflation but also buried the Phillips curve. This paper provides an alternative explanation: labor market policies that have eroded worker bargaining power might have been the source of the demise of the Phillips curve. We show that a nearly 90 percent reduction in inflation volatility is possible even without any changes in monetary policy when the economy transitions from equal shares of power between workers and firms to a new balance in which firms dominate.

Topics: Monetary policy; trade unions

Samuel Dodini, Jeff Larrimore, and Anna Tranfaglia

This paper considers the credit response of individuals after the implementation of new work requirements for Supplemental Nutrition Assistance Program (SNAP) benefits, using a large nationally representative sample of credit records. We find that the new requirements lead more people to seek out new credit. New work requirements also result in an increase in total outstanding balances on bank and retail card accounts and increase the number of borrowers that are past due on these accounts. These findings suggest that some individuals are turning to credit and debt products to cover expenses after losing eligibility for SNAP benefits.

Topics: Public policy; Borrowing & lending

Daniel A. Dias and Joao B. Duarte

We show that monetary policy affects homeownership decisions and argue that this effect is an important and overlooked channel of monetary policy transmission. We first document that monetary policy shocks are a substantial driver of fluctuations in the U.S. homeownership rate and that monetary policy affects households' housing tenure choices. We show that the homeownership decision channel amplifies the redistributive effects of monetary policy, with contractionary shocks benefiting more outright homeowners and disadvantaging more renters and homeowners with a mortgage.

Topics: Monetary policy; housing

Juan Herreno and Mathieu Pedemonte

We study the differential regional effects of monetary policy, exploiting geographical heterogeneity in income across cities in the United States. We find that prices and employment in poorer cities react more to monetary policy shocks. The results for prices hold for a wide range of narrow consumer expenditure categories. We show that an increase in heterogeneity across cities amplifies the effect of monetary policy on prices and employment.

Topics: Monetary policy; Spatial economics

Victor Hernandez Martinez and Kaixin Liu

This paper argues that the value of unemployment insurance (UI) can be decomposed into a liquidity component and an insurance component. Using Spanish administrative data, we find that the liquidity component represents half of the value of UI, while the insurance component captures the remaining half. However, the relevance of each component is highly heterogeneous across different groups of workers. Both poorer and wealthier workers are similarly liquidity-constrained, but poorer workers place a higher value on UI because the insurance component is significantly more important for them.

Topics: Unemployment; public policy

Takushi Kurozumi and Willem Van Zandweghe

Should monetary policy offset the effects of labor supply shocks on inflation and the output gap? Motivated by weak labor force participation during the pandemic, we reexamine the question by introducing labor force entry and exit in an otherwise canonical model with sticky prices and wages. The entry decision generates an employment channel of monetary policy, and a labor supply shock to the value of nonparticipation in the labor market induces a policy trade-off between stabilization of the employment gap and wage growth.

Topics: Monetary policy; Employment & labor markets

Brad Hershbein and Bryan Stuart

This paper studies how U.S. local labor markets respond to employment losses after recessions. We find that following each recession between 1973 and 2009, areas that lose more jobs during the recession experience persistent relative declines in employment and population. These local labor markets also experience persistent decreases in the employment–population ratio and per capita earnings. Our results imply that limited population responses result in longer-lasting consequences for local labor markets than previously thought and that recessions are followed by persistent reallocation of employment across space.

Topics: Employment & labor markets; Recessions; Spatial economics

John Mondragon and Johannes Wieland

What explains record U.S. house price growth since late 2019? We show that the shift to remote work explains over one half of the 23.8 percent national house price increase over this period. Using variation in remote work exposure across U.S. metropolitan areas, we estimate that an additional percentage point of remote work causes a 0.93 percent increase in house prices after controlling for negative spillovers from migration. Our results imply a fundamentals-based explanation for the recent increases in housing costs over speculation or financial factors and that the evolution of remote work is likely to have large effects on the future path of house prices and inflation.

Topics: Housing

Alexander Bick and Adam Blandin

Economists have recently begun using independent online surveys to collect national labor market data. Questions remain over the quality of such data. This paper provides an approach to address these concerns. Our case study is the Real-Time Population Survey (RPS), a novel online survey built around the Current Population Survey (CPS). Our discussion contains practical suggestions for the design of novel labor market surveys and highlights other promising applications of our methodology.

Topics: Employment & labor markets; COVID-19

Lauren Sartain and Lisa Barrow

In 2017, Chicago Public Schools adopted an online universal application system for all high schools with the hope of providing more equitable access to high-performance schools. Despite the new system, Black students and students living in low-socioeconomic-status neighborhoods remained less likely than their peers to enroll in a high-performance high school. We characterize constraints that students and families may face in enrolling in a high-performance high school, including eligibility based on prior academic achievement, distance from high-performance options, and neighborhood and elementary school resources.

Topics: K-12 education; Public policy; Diversity & inclusion

Daniel Aaronson, Jacob Faber, Daniel Hartley, Bhashkar Mazumder, and Patrick Sharkey

We estimate the long-run effects of the 1930s Home Owners Loan Corporation (HOLC) redlining maps on census tract–level measures of socioeconomic status and economic opportunity from the Opportunity Atlas (Chetty et al. 2018). We find that the maps had large and statistically significant causal effects on a wide variety of outcomes measured at the census tract level for cohorts born in the late 1970s and early 1980s.

Topics: Housing; Inequality; Economic opportunity

Dionissi Aliprantis and Hal Martin

The Opportunity Atlas (OA) is an innovative data set that ranks neighborhoods according to children’s adult outcomes in several domains, including income. This paper shows that neighborhood sorting contributes to OA estimates. We document cases in which small sample sizes and changes over time can explain disagreements between OA rankings and those based on contemporaneous variables.

Topics: Economic opportunity; Public policy

Fumiko Hayashi, Marie-Hélène Felt, Joanna Stavins, and Angelika Welte

Using data from the United States and Canada, we quantify consumers’ net pecuniary cost of using cash, credit cards, and debit cards for purchases across income cohorts. We find that consumers in the lowest-income cohort pay the highest net pecuniary cost as a percentage of transaction value, while consumers in the highest-income cohort pay the lowest net cost.

Topics: Consumer economics; Wages, income, and wealth; Inequality

Marianna Kudlyak, Murat Tasci, and Didem Tuzemen

This paper estimates the impact of minimum wage increases on the quantity of labor demanded as measured by firms’ vacancy postings. We find that minimum wage increases during the 2005–18 period led to substantial declines in vacancy postings in occupations with a larger share of employment around the prevailing minimum wage. Our estimate implies that a 10 percent increase in the binding minimum wage level reduces vacancies by 2.4 percent in this group.

Topics: Minimum wage; Unemployment

Brooke Helppie-McFall and Joanne W. Hsu

Using data from the Survey of Consumer Finances, we describe the financial profiles of U.S. families whose workers were most vulnerable to coronavirus-related earnings losses in the spring of 2020, based on whether a particular worker was deemed "essential" and whether a worker's job could be conducted remotely. We find that families with workers not able to work remotely who were most vulnerable to layoff also had both demographic and financial profiles that are associated with greater vulnerability to income shocks: These families were more likely to be people of color and single wage earners and to have less savings.

Topics: COVID-19; Unemployment; Wages, income, and wealth

Dionissi Aliprantis, Hal Martin, and Kristen Tauber

There is currently interest in crafting public housing policy that combats, rather than contributes to, the residential segregation in American cities. One such policy is the Housing Mobility Program (HMP), which aims to help people move from disinvested neighborhoods to areas with more opportunities. This paper studies how design features influence the success of HMPs in reducing racial segregation.

Topics: Housing; Public policy; Diversity & inclusion

James Bailey, Nathan Blascak, and Slava Mikhed

In July 2005, a set of cuts to Medicaid eligibility and coverage went into effect in the state of Missouri. We show that the Medicaid reform led to increases in both credit card borrowing and debt in third-party collections. Our results suggest that there are important asymmetries in the financial effects of shrinking a public health insurance program compared with a public health insurance expansion.

Topics: Public health; Public policy; Insurance

Maria Marta Ferreyra, Carlos Garriga, Juan David Martin, and Angelica Maria Sanchez Diaz

To evaluate the potential effects of free college policies, we develop and estimate a dynamic model of college enrollment, performance, and graduation. Universal free college expands enrollment the most, but it does not affect graduation rates and has the highest per-graduate cost. Performance-based free college, in contrast, delivers a slightly lower enrollment expansion, yet a greater graduation rate at a lower per-graduate cost. Additional, complementary policies might be required to elicit the large effort increase needed to raise graduation rates.

Topics: Higher education; Public policy

Sitian Liu and Yichen Su

Prior studies have shown that women are more willing to trade off wages for short commutes than men. Our model shows that differential commuting choices account for about 16-21 percent of the gender wage gap on average, but the contribution varies widely across residential locations. The model also shows that policies that increase commute speed or density in the central city neighborhoods could moderately lower the gender wage gap.

Topics: Wages, income, and wealth; Inequality

John Coglianese and Brendan M. Price

Joblessness is highly seasonal. We show that an excess share of prime-age U.S. workers experience recurrent separations spaced exactly 12 months apart. We find that these workers incur large earnings losses during the off-season. Lost earnings are (1) driven mainly by repeated separations from the same employer; (2) not recouped at other firms; (3) partly offset by unemployment benefits; and (4) amplified by concurrent drops in partners' earnings.

Topics: Employment & labor markets; Unemployment; Insurance

Leland D. Crane, Ryan A. Decker, Aaron Flaaen, Adrian Hamins-Puertolas, and Christopher Kurz

We review official data on business exit in recent decades. Business exit is common in the U.S. and is countercyclical. We explore a range of alternative measures and indicators of business exit, including novel measures based on payroll events and phone-tracking data, and find tentative evidence that exit has been elevated during 2020. Evidence is somewhat mixed, however, and exiting businesses do not appear to represent a large share of U.S. employment.

Topics: Small business; COVID-19; Recessions

Kristopher Gerardi, Paul Willen, and David Hao Zhang

Black and Hispanic White borrowers pay more than 50 basis points higher interest rates than White borrowers in a large, representative sample of loans insured by Fannie Mae and Freddie Mac. The authors show that this disparity is primarily driven by the fact that White borrowers are more likely to exploit periods of falling interest rates by refinancing their mortgages or moving.

Topics: Inequality; Monetary policy; Borrowing & lending

Diego Comin, Ana Danieli, and Martí Mestieri

We propose a mechanism for labor-market polarization based on the nonhomotheticity of demand that we call the income-driven channel. Our mechanism builds on a novel empirical fact: Expenditure elasticities and production intensities in low- and high-skill occupations are positively correlated across sectors. Thus, as income grows, demand shifts toward expenditure-elastic sectors, and the relative demand for low- and high-skill occupations increases, causing labor-market polarization.

Topics: Employment & labor markets; Wages, income, and wealth; Low & moderate income

Alexander Ludwig, Alexander Monge-Naranjo, Ctirad Slavik, and Faisal Sohail

We estimate the effects that various financial deregulations in the U.S. have had on the country's income distribution. We find that the various reforms have moved inequality in drastically different directions.

Topics: Inequality; Low & moderate income; Financial regulation

Nicolas Petrosky-Nadeau

Job acceptance decisions weigh the value of a job against remaining unemployed. A reservation level of benefit payments exists in this dynamic decision problem at which an individual is indifferent between accepting and refusing an offer. Estimating the reservation benefit for a wide range of U.S. workers suggests that few would turn down an offer to return to work at the previous wage under the CARES Act expanded unemployment insurance payments.

Topics: Insurance; Unemployment; COVID-19

Lindsay Jacobs, Elizabeth Llanes, Kevin Moore, Jeffrey Thompson, and Alice Henriques Volz

Hannah Rubinton

Michele Battisti, Ryan Michaels, and Choonsung Park

J. Ignacio García-Pérez and Sílvio Rendon

François Gourio and Charles Fries

Pia Orrenius, Madeline Zavodny, and Stephanie Gullo

Brett Barkley and Mark E. Schweitzer

Robert E. Hall and Marianna Kudlyak

Rajashri Chakrabarti, Vyacheslav Fos, Andres Liberman, and Constantine Yannelis

Didem Tüzemen

Daniel Cooper, Karen Dynan, and Hannah Rhodenhiser

Sanghoon Lee, Seung Hoon Lee, and Jeffrey Lin

Bo Zhao

Rajashri Chakrabarti and Maxim Pinkovskiy

Katharine Bradbury

Eric Nielsen

Davide Melcangi

Matthew Jaremski and David C. Wheelock

Andrew M. Dumont

Didem Tüzemen and Willem Van Zandweghe

Donna Feir, Rob Gillezeau, and Maggie E.C. Jones

Samuel Antill and Asani Sarkar

Diego Daruich

Enrique Martínez-García and Valerie Grossman

Kimberly Bayard, Emin Dinlersoz, Timothy Dunne, John Haltiwanger, Javier Miranda, and John J. Stevens

Andreas Fuster, Greg Kaplan, and Basit Zafar

Jonathan Fisher, David Johnson, Timothy Smeeding, and Jeffrey Thompson

Jeffrey Thompson, Michael Parisi, and Jesse Bricker

Jack DeWaard, Janna E. Johnson, and Stephan D. Whitaker

Bill Dupor, Marios Karabarbounis, Marianna Kudlyak, and M. Saif Mehkari

Daniel Aaronson, Jonathan Davis, and Karl Schulze

Michael Sposi

Bruce Fallick and Pawel Krolikowski

Tomaz Cajner, Tyler Radler, David Ratner, and Ivan Vidangos

Ina Ganguli, Jeffrey Lin, and Nicholas Reynolds

Sarena F. Goodman, Alice Henriques Volz, and Alvaro Mezza

Brandyn Bok, Daniele Caratelli, Domenico Giannone, Argia Sbordone, and Andrea Tambalotti

Leonard Nakamura, Jon Samuels, and Rachel Soloveichik

M.M. Croce, A.G. Karantounias, S. Raymond, and L. Schmid

Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, and Huiyu Li

Kartik Athreya, José Mustre-del-Río, and Juan M. Sánchez

Patrick Coate, Pawel Krolikowski, and Mike Zabek

Marco Bassetto and Wei Cui

Chi-Young Choi and Alexander Chudik

Keith Barnatchez, Leland D. Crane, and Ryan A. Decker

Arthur Acolin, Paul Calem, Julapa Jagtiani, and Susan Wachter

Amanda Bayer and David W. Wilcox

Daniel Aaronson, Rajeev Dehejia, Andrew Jordan, Cristian Pop-Eleches, Cyrus Samii, and Karl Schulze

Daniel Cooper, María José Luengo-Prado, and Jonathan A. Parker

Lei Ding and Leonard Nakamura

Randall Akee, Elton Mykerezi, and Richard M. Todd

R. Anton Braun, Karen A. Kopecky, and Tatyana Koreshkova

Jonathan Davis and Bhashkar Mazumder

Kelly D. Edmiston

Randal J. Verbrugge and Joshua Gallin

Anat Bracha and Mary A. Burke

Kristle Cortés, Andrew Glover, and Murat Tasci

Pedro Amaral

Dionissi Aliprantis

Andrew Hanson, Zackary Hawley, and Hal Martin

Pia Orrenius

William R. Emmons and Lowell R. Ricketts

Roberto Pinheiro and Murat Tasci

Daniel Aaronson and Brian J. Phelan

Economic Research Department

Jenny Schuetz, Arturo Gonzalez, Jeff Larrimore, Ellen A. Merry, and Barbara J. Robles

Sarena F. Goodman and Adam M. Isen

Katharine Bradbury

Jonathan Heathcote and Hitoshi Tsujiyama

Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak, and John Mondragon

Daniel Cooper and María José Luengo-Prado

Lisa Barrow, Lauren Sartain, and Marisa de la Torre

Steven Laufer and Andrew Paciorek