IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Cyclicality of the Opportunity Cost of Employment

  • Gabriel Chodorow-Reich
  • Loukas Karabarbounis

The flow opportunity cost of moving from unemployment to employment consists of foregone public benefits and the foregone value of non-working time in units of consumption. We construct a time series of the opportunity cost of employment using detailed microdata and administrative or national accounts data to estimate benefits, hours per worker, consumption by labor force status, taxes, and preference parameters. Our estimated opportunity cost is procyclical and volatile over the business cycle. The estimated cyclicality implies far less unemployment volatility in many leading models of the labor market than that observed in the data, irrespective of the level of the opportunity cost.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://scholar.harvard.edu/chodorow-reich/node/126541
Download Restriction: no

Paper provided by Harvard University OpenScholar in its series Working Paper with number 126541.

as
in new window

Length:
Date of creation: Jan 2015
Date of revision:
Handle: RePEc:qsh:wpaper:126541
Contact details of provider: Postal: 1737 Cambridge Street, Cambridge, MA 02138
Phone: 617-496-2450
Fax: 617-496-5149
Web page: http://scholar.harvard.edu

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Kurt Mitman & Iourii Manovskii & Fatih Karahan & Marcus Hagedorn, 2013. "Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects," 2013 Meeting Papers 1260, Society for Economic Dynamics.
  2. Mark Bils & Yongsung Chang & Sun-Bin Kim, 2009. "Comparative Advantage and Unemployment," NBER Working Papers 15030, National Bureau of Economic Research, Inc.
  3. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  4. Blank, Rebecca M & Card, David E, 1991. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1157-89, November.
  5. Martin Browning & Thomas Crossley, 1996. "Unemployment Insurance Benefit Levels and Consumption Changes," Department of Economics Working Papers 1996-01, McMaster University.
  6. Mathias Trabandt & Harald Uhlig, 2006. "How Far Are We From The Slippery Slope? The Laffer Curve Revisited," SFB 649 Discussion Papers SFB649DP2006-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. Brigitte C. Madrian & Lars John Lefgren, 1999. "A Note on Longitudinally Matching Current Population Survey (CPS) Respondents," NBER Technical Working Papers 0247, National Bureau of Economic Research, Inc.
  8. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  9. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009. "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences," Working Papers 0903, Harris School of Public Policy Studies, University of Chicago.
  10. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  11. Rogerson, Richard & Wright, Randall, 1988. "Involuntary unemployment in economies with efficient risk sharing," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 501-515.
  12. James S. Costain & Michael Reiter, 2003. "Business Cycles, Unemployment Insurance, and the Calibration of Matching Models," CESifo Working Paper Series 1008, CESifo Group Munich.
  13. Dale T. Mortensen, 2005. "More on Unemployment and Vacancy Fluctuations," 2005 Meeting Papers 326, Society for Economic Dynamics.
  14. Pistaferri, Luigi, 2002. "Anticipated and Unanticipated Wage Changes, Wage Risk, and Intertemporal Labour Supply," CEPR Discussion Papers 3628, C.E.P.R. Discussion Papers.
  15. Anderson, Patricia M & Meyer, Bruce D, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 913-37, August.
  16. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
  17. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  18. Wouter J. den Haan & Garey Ramey & Joel Watson, 1997. "Job Destruction and Propagation of Shocks," NBER Working Papers 6275, National Bureau of Economic Research, Inc.
  19. Alan B. Krueger & Andreas I. Mueller, 2014. "A Contribution to the Empirics of Reservation Wages," NBER Working Papers 19870, National Bureau of Economic Research, Inc.
  20. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:qsh:wpaper:126541. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Brandon)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.