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Unemployment Insurance, Wage Pass-Through, and Endogenous Take-Up
September 2025
Working Paper Number:
CES-25-59
This paper studies how unemployment insurance (UI) generosity affects reservation wages, re-employment wages, and benefit take-up. Using Benefit Accuracy Measurement (BAM) data, we estimate a cross-sectional elasticity of reservation wages with respect to weekly UI benefits of 0.014. Exploiting state variation in Pandemic Unemployment Assistance (PUA) intensity and the timing of federal supplements, we find that expanded benefits during COVID-19 increased reservation wages by 8'12 percent. Using CPS rotation data, we also document a 9 percent rise in re-employment wages for UI-eligible workers relative to ineligible workers. Over the same period, the UI take-up rate rose from roughly 30 to 40 percent; Probit estimates indicate that higher benefit levels, rather than changes in observables, account for this increase. A directed search model with an endogenous filing decision replicates these facts: generosity primarily operates through the extensive margin of take-up, which mutes the pass-through from benefits to wages.
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Size Matters: Matching Externalities and the Advantages of Large Labor Markets
April 2025
Working Paper Number:
CES-25-22
Economists have long hypothesized that large and thick labor markets facilitate the matching between workers and firms. We use administrative data from the LEHD to compare the job search outcomes of workers originally in large and small markets who lost their jobs due to a firm closure. We define a labor market as the Commuting Zone'industry pair in the quarter before the closure. To account for the possible sorting of high-quality workers into larger markets, the effect of market size is identified by comparing workers in large and small markets within the same CZ, conditional on workers fixed effects. In the six quarters before their firm's closure, workers in small and large markets have a similar probability of employment and quarterly earnings. Following the closure, workers in larger markets experience significantly shorter non-employment spells and smaller earning losses than workers in smaller markets, indicating that larger markets partially insure workers against idiosyncratic employment shocks. A 1 percent increase in market size results in a 0.015 and 0.023 percentage points increase in the 1-year re-employment probability of high school and college graduates, respectively. Displaced workers in larger markets also experience a significantly lower need for relocation to a different CZ. Conditional on finding a new job, the quality of the new worker-firm match is higher in larger markets, as proxied by a higher probability that the new match lasts more than one year; the new industry is the same as the old one; and the new industry is a 'good fit' for the worker's college major. Consistent with the notion that market size should be particularly consequential for more specialized workers, we find that the effects are larger in industries where human capital is more specialized and less portable. Our findings may help explain the geographical agglomeration of industries'especially those that make intensive use of highly specialized workers'and validate one of the mechanisms that urban economists have proposed for the existence of agglomeration economies.
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Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization
December 2024
Working Paper Number:
CES-24-78
We analyze the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000'2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to-population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service sectors like medical services, education, retail, and hospitality. Using the panel structure of the employer-employee data, we decompose changes in the employment composition of places into trade-induced shifts in the gross flows of people across sectors, locations, and non-employment status. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019. The employment recovery instead stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas, with minimal contributions from cross-sector transitions of former manufacturing workers. Although worker inflows into non-manufacturing more than fully offset manufacturing employment losses in trade-exposed locations after 2010, incumbent workers neither fully recover earnings losses nor predominately exit the labor market, but rather age in place as communities undergo rapid demographic and industrial transitions.
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EITC Participation Results and IRS-Census Match Methodology, Tax Year 2021
December 2024
Working Paper Number:
CES-24-75
The Earned Income Tax Credit (EITC), enacted in 1975, offers a refundable tax credit to low income working families. This paper provides taxpayer and dollar participation estimates for the EITC covering tax year 2021. The estimates derive from an approach that relies on linking the 2022 Current Population Survey Annual Social and Economic Supplement (CPS ASEC) to IRS administrative data. This approach, called the Exact Match, uses survey data to identify EITC eligible taxpayers and IRS administrative data to indicate which eligible taxpayers claimed and received the credit. Overall in tax year 2021 eligible taxpayers participated in the EITC program at a rate of 78 percent while dollar participation was 81 percent.
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The Effect of Food Assistance Work Requirements on Labor Market Outcomes
September 2024
Working Paper Number:
CES-24-54
The Supplemental Nutrition Assistance Program (SNAP), formerly named the Food Stamp Program, has long been an integral part of the US social safety net. During US welfare reforms in the mid-1990s, SNAP eligibility became more restrictive with legislation citing a need to improve self-sufficiency of participating households. As a result, legislatures created two of these eligibility requirements: the General Work Requirement (GWR), which forces an adult to work to receive benefits, and the Able-Bodied Adult Without Dependents (ABAWD) work requirement, which requires certain adults to work a certain number of hours to receive benefits. Using restricted-access SNAP microdata from nine states, we exploit age cutoffs of the ABAWD work requirement and General Work Requirement (GWR) to estimate the effect of these policies on labor outcomes. We find that at the ABAWD age cutoff, there is no statistically significant evidence of a discontinuity across static and dynamic employment outcomes. At the GWR age cutoff, unemployed SNAP users and SNAP-eligible adults are on average more likely to leave the labor force than to continue to search for work.
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Transitional Costs and the Decline of Coal: Worker-Level Evidence
September 2024
Working Paper Number:
CES-24-53
We examine the labor market impacts of the U.S. coal industry's decline using comprehensive administrative data on workers from 2005-2021. Coal workers most exposed to the industry's contraction experienced substantial earnings losses, equivalent to 1.6 years of predecline wages. These losses stem from both reduced employment duration (0.37 fewer years employed) and lower annual earnings (17 percent decline) between 2012-2019, relative to similar workers less exposed to coal's decline. Earnings reductions primarly occur when workers remain in local labor markets but are not employed in mining. While coal workers do not exhibit lower geographic mobility, relocation does not significantly mitigate their earnings losses.
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Household Wealth and Entrepreneurial Career Choices: Evidence from Climate Disasters
July 2024
Working Paper Number:
CES-24-39
This study investigates how household wealth affects the human capital of startups, based on U.S. Census individual-level employment data, deed records, and geographic information system (GIS) data. Using floods as a wealth shock, a regression discontinuity analysis shows inundated residents are 7% less likely to work in startups relative to their neighbors outside the flood boundary, within a 0.1-mile-wide band. The effect is more pronounced for homeowners, consistent with the wealth effect. The career distortion leads to a significant long-run income loss, highlighting the importance of self-insurance for human capital allocation.
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Contrasting the Local and National Demographic Incidence of Local Labor Demand Shocks
July 2024
Working Paper Number:
CES-24-36
This paper examines how spatial frictions that differ among heterogeneous workers and establishments shape the geographic and demographic incidence of alternative local labor demand shocks, with implications for the appropriate level of government at which to fund local economic initiatives. LEHD data featuring millions of job transitions facilitate estimation of a rich two-sided labor market assignment model. The model generates simulated forecasts of many alternative local demand shocks featuring different establishment compositions and local areas. Workers within 10 miles receive only 11.2% (6.6%) of nationwide welfare (employment) short-run gains, with at least 35.9% (62.0%) accruing to out-of-state workers, despite much larger per-worker impacts for the closest workers. Local incidence by demographic category is very sensitive to shock composition, but different shocks produce similar demographic incidence farther from the shock. Furthermore, the remaining heterogeneity in incidence at the state or national level can reverse patterns of heterogeneous demographic impacts at the local level. Overall, the results suggest that reduced-form approaches using distant locations as controls can produce accurate estimates of local shock impacts on local workers, but that the distribution of local impacts badly approximates shocks' statewide or national incidence.
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Family Resources and Human Capital in Economic Downturns
March 2024
Working Paper Number:
CES-24-15
I study how recessions impact the human capital of young adults and how these effects vary over the parent income gradient. Using a novel confidential linked survey dataset from U.S. Census, I document that the negative effects of worse local unemployment shocks on educational attainment are strongly concentrated among middle-class children, with losses in parental home equity being potentially important mechanisms. To probe the aggregate implications of these findings and assess policy implications, I develop a model of selection into college and life-cycle earnings that comprises endogenous parental transfers for education, multiple schooling options, and uncertainty in post-graduation employment outcomes. Simulating a recession in the model produces a 'hollowing out the middle' in lifecycle earnings in the aggregate, and educational borrowing constraints play a key role in this result. Counterfactual policies to expand college access in response to the recession can mitigate these effects but struggle to be cost effective.
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Scientific Talent Leaks Out of Funding Gaps
February 2024
Working Paper Number:
CES-24-08
We study how delays in NIH grant funding affect the career outcomes of research personnel. Using comprehensive earnings and tax records linked to university transaction data along with a difference-in-differences design, we find that a funding interruption of more than 30 days has a substantial effect on job placements for personnel who work in labs with a single NIH R01 research grant, including a 3 percentage point (40%) increase in the probability of not working in the US. Incorporating information from the full 2020 Decennial Census and data on publications, we find that about half of those induced into nonemployment appear to permanently leave the US and are 90% less likely to publish in a given year, with even larger impacts for trainees (postdocs and graduate students). Among personnel who continue to work in the US, we find that interrupted personnel earn 20% less than their continuously-funded peers, with the largest declines concentrated among trainees and other non-faculty personnel (such as staff and undergraduates). Overall, funding delays account for about 5% of US nonemployment in our data, indicating that they have a meaningful effect on the scientific labor force at the national level.
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