Redirect


This site has moved to http://economistsview.typepad.com/
The posts below are backup copies from the new site.

August 14, 2014

Latest Posts from Economist's View

Latest Posts from Economist's View


Links for 8-14-14

Posted: 14 Aug 2014 12:03 AM PDT

'Cutting Jobless Benefits Did Not Boost Employment'

Posted: 13 Aug 2014 07:47 AM PDT

It's okay to help people:

EPI and AEI Agree: Cutting Jobless Benefits Did Not Boost Employment, by Joshua Smith, EPI: Perhaps Hell has not frozen over, but it appears that someone down there may have leaned on the thermostat. That's right, the Economic Policy Institute and the American Enterprise Institute are in lock-step agreement on an important fiscal policy matter.
During the Great Recession and its aftermath, the federal government acted to help victims of the severe downturn by funding programs that extended unemployment benefits—to up to 99 weeks in some cases, up from the standard 26 weeks. As the economic recovery continued, weak as it was for many in the working class, many lawmakers on the right began to believe that these extended benefits were a drag on employment—the theory being that government checks reduced the incentive for recipients to find a job, and that cutting off this lifeline would compel unemployed workers to look harder for work and perhaps take jobs they may not have accepted if the benefits had continued. Relying on this premise, Congress allowed the federally-funded Emergency Unemployment Compensation program to lapse last December.
Now, more than seven months later, data are available to test this idea. Coming from perspectives that diverge greatly along the ideological spectrum, scholars at both AEI and EPI have come to the conclusion that this "bootstraps" theory is incorrect—curtailing jobless benefits did not boost employment. ...

'Unemployment Fluctuations are Mainly Driven by Aggregate Demand Shocks'

Posted: 13 Aug 2014 07:47 AM PDT

Do the facts have a Keynesian bias?:

Using product- and labour-market tightness to understand unemployment, by Pascal Michaillat and Emmanuel Saez, Vox EU: For the five years from December 2008 to November 2013, the US unemployment rate remained above 7%, peaking at 10% in October 2009. This period of high unemployment is not well understood. Macroeconomists have proposed a number of explanations for the extent and persistence of unemployment during the period, including:

  • High mismatch caused by major shocks to the financial and housing sectors,
  • Low search effort from unemployed workers triggered by long extensions of unemployment insurance benefits, and
  • Low aggregate demand caused by a sudden need to repay debts or pessimism, but no consensus has been reached.

In our opinion this lack of consensus is due to a gap in macroeconomic theory: we do not have a model that is rich enough to account for the many factors driving unemployment – including aggregate demand – and simple enough to lend itself to pencil-and-paper analysis. ...

In Michaillat and Saez (2014), we develop a new model of unemployment fluctuations to inspect the mechanisms behind unemployment fluctuations. The model can be seen as an equilibrium version of the Barro-Grossman model. It retains the architecture of the Barro-Grossman model but replaces the disequilibrium framework on the product and labour markets with an equilibrium matching framework. ...

Through the lens of our simple model, the empirical evidence suggests that price and real wage are somewhat rigid, and that unemployment fluctuations are mainly driven by aggregate demand shocks.

No comments: