Replication data for: Optimal Labor-Market Policy in Recessions

Principal Investigator(s): View help for Principal Investigator(s) Philip Jung; Keith Kuester

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Project Citation:

Jung, Philip, and Kuester, Keith. Replication data for: Optimal Labor-Market Policy in Recessions. Nashville, TN: American Economic Association [publisher], 2015. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114061V1

Project Description

Summary: Within a search and matching model with risk-averse workers, endogenous hiring and separation, and unobservable search effort, we show how to decentralize the constrained-efficient allocation by a combination of a production tax and three labor-market policy instruments: vacancy subsidies, layoff taxes, and unemployment benefits. We derive analytical expressions for the optimal mix of these over the business cycle. Calibrating the model to the US economy under the assumption that wages are rigid, we find that hiring subsidies and layoff taxes should rise considerably and persistently in recessions. The optimal variation in unemployment benefits, in contrast, is quantitatively small and short-lived. (JEL E24, E32, J24, J63, J64, J65)

Scope of Project

JEL Classification:
      E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
      E32 Business Fluctuations; Cycles
      J24 Human Capital; Skills; Occupational Choice; Labor Productivity
      J63 Labor Turnover; Vacancies; Layoffs
      J64 Unemployment: Models, Duration, Incidence, and Job Search
      J65 Unemployment Insurance; Severance Pay; Plant Closings

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Published Versions

V1 [2019-10-12]

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DDI 2.5

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