The Marriage Unemployment Gap, joint with Sekyu Choi, accepted at the B.E. Journal of Macroeconomics

  1. In this paper we document that married individuals face a lower unemployment rate than their single counterparts. We refer to this phenomenon as the marriage unemployment gap. Despite the dramatic demographic changes in the labor market over the last decades, this gap has been remarkably stable both for men and women. Using a flow-decomposition exercise, we assess which transition probabilities (across labor force states) are behind the marriage unemployment gap. We find that, for men, the higher attachment to employment of married males is the main driver of the gap. For females, we find that the participation margin plays a crucial role.

Working Papers

On Households and Unemployment Insurance, joint with Sekyu Choi, R&R Quantitative Economics

  1. In this paper we study unemployment insurance in a framework where the main source of heterogeneity among agents is the type of household they live in: some agents live alone while others live with their spouses as a family. Our exercise is motivated by the fact that married individuals can rely on spousal income to smooth labor market shocks, while singles cannot. We extend a version of the standard incomplete markets model to include two-agent households and calibrate it to the US economy, with special emphasis on matching differences in labor market transitions among different types of households. Our central finding is that the unemployment insurance program improves the welfare of single households but not of married ones. We show that this result is driven by the amount of self insurance existing in married households and thus, we highlight the interplay between self and government provided insurance and its implication for policy.

Labor Market Dynamics of Married Couples, joint with Nezih Guner and Yuliya Kulikova

  1. In this paper, we study the joint labor market transitions of married couples between three labor market states: employment, unemployment, and out of the labor force. Following a decomposition exercise proposed by Shimer (2012), we assess the importance of different labor market transitions for married males and females. The results show that married men and women differ in their labor market dynamics. The transitions between employment and unemployment are the key driver of the cyclical movements in unemployment for married males. For married females, however, transitions in and out of the labor force play a key role. We calculate the importance of the added worker effect and show that without the added worker effect, female labor participation and unemployment rates in 2000-2010 period would be about 2.5 and 0.3 percentage points higher, respectively. This 0.3 percentage points represents about 6.16% of the female unemployment rate.

Work in Progress

The Black-White Gap in Wages and Employment, joint with Christopher Rauh

  1. In the US economy, black males earn, on average, lower hourly wages than their white counterparts. This difference in hourly wages increases over the working life. At the same time, the probability of being employed is significantly lower for black than for equally educated white males. Notably, the black-white gap in employment is almost constant over the working life. These two facts suggest that the determination of the hourly wage gap is related to on-the-job human capital accumulation. In this paper, we put forward a model of on-the-job human capital accumulation with labor market frictions to quantitatively assess how much of the black-white hourly wage gap can be accounted for by differences in employment probabilities versus pre-market factors. Conditional on education, we find that the differences in employment probabilities between blacks and whites account for around 85% of the total wage gap over the working life.

Debt Deleveraging, Default and Credit Rationing, joint with Ignacio González

  1. We model an heterogenous-agents economy with financial intermediation where a single negative shock to the borrowing capacity of households induces a simultaneous fall in the demand and supply of credit. As in Lorenzoni and Guerrieri (2011), the unexpected shock forces constrained consumers to deleverage whereas unconstrained consumers increase their precautionary savings, depressing the aggregate demand of credit and the savings interest rate. In our model, some consumers decide to deleverage by defaulting on their debt, transferring the debt burden to the financial intermediary. If the wave of defaults is sufficiently large, the financial intermediary becomes capital constrained and is forced to raise the credit spreads and to cut the supply of credit. The resulting credit rationing prevents firms from increasing the labor demand. The result is a single-shock crisis episode driven simultaneously by the shortage of demand and supply of credit. We argue that this is the kind of credit crisis that, in the aftermath of the financial crisis, countries like the U.S. or Spain have suffered.  

On the Marriage Wage Premium, joint with Brendon McConnell