Iourii Manovskii:
Research
Published
Papers:
Joint
with Dmytro Hryshko,
University of Alberta
Journal of Monetary
Economics, 130 Sept. 2022, pp. 17-33.
We
identify two sets of households in the Panel Study of Income Dynamics (PSID)
differing dramatically in their income and consumption dynamics, although both
should be equally representative. The degree of consumption insurance in each
subsample is consistent with the standard incomplete-markets model’s
prediction. We contrast PSID and administrative earnings data and study the
patterns in international datasets modeled on the PSID. We find an important
role of differential attrition based on the dynamic properties of incomes in
inducing the differences and identify PSID households providing a better guide
to income dynamics and consumption insurance in the U.S.
Joint
with Dmytro Hryshko,
University of Alberta and Moira Daly, Copenhagen Business School
International
Economic Review, 63(1) Feb. 2022, pp.
95-124.
The
stochastic process for earnings is the key element of incomplete markets models
in modern quantitative macroeconomics. We show that a simple modification of
the canonical earnings process used in the literature leads to a substantial
improvement in the measurement of earnings dynamics in administrative and
survey data alike. Empirically, earnings at the start or end of earnings spells
are lower and more volatile than the observations in the interior of earnings
histories, reflecting mainly the effects of working less than the full year.
Ignoring these properties of earnings, as is standard in the literature, leads
to a substantial mismeasurement of the variances of permanent and transitory
shocks and induces the large and widely documented divergence in the estimates
of these variances based on fitting the earnings moments in levels or growth
rates. Accounting for these effects enables more accurate analysis using
quantitative models with permanent and transitory earnings risk and improves
empirical estimates of consumption insurance against permanent earnings shocks.
Joint
with Marcus Hagedorn, University of Oslo, Jinfeng Luo, University of Pennsylvania, and Kurt Mitman, IIES Stockholm University
Journal of Monetary Economics, 102 April 2019, pp. 1-23.
We
assess the power of forward guidance--promises about future interest rates--as
a monetary tool in a liquidity trap using a quantitative incomplete-markets
model. Our results suggest the effects of forward guidance are negligible. A
commitment to keep future nominal interest rates low for a few
quarters--although macro indicators suggest otherwise--has only trivial effects
on current output and employment. We explain theoretically why in complete
markets models forward guidance is powerful--generating a "forward
guidance puzzle"--and why this puzzle disappears in our model. We also
clarify theoretically ambiguous conclusions from previous research about the
effectiveness of forward guidance in incomplete and complete markets models.
Joint
with Gueorgui Kambourov,
Canadian
Journal of Economics, 53(1) Jan. 2020, pp 174-211.
The
literature on the returns to training has pointed out that, immediately
following a training episode, wages of participants in employer-sponsored
training increase substantially while wages of participants in
government-sponsored training hardly change. We argue that there is a potential
selection issue: most of the government-sponsored trainees are occupation
switchers while most participants in employer-sponsored training are occupation
stayers. An occupational switch involves a substantial destruction of human
capital, and once we account for the associated decline in wages we find a
large positive impact of both employer- and government-sponsored training on
workers' human capital.
Joint
with Dmytro Hryshko,
University of Alberta
American Economic Review, Papers and Proceedings,
Vol. 108, May 2018, pp. 292-96.
A
large body of knowledge on income dynamics in the U.S. is based on data from the
Panel Study of Income Dynamics (PSID). We find two sets of households in the
PSID that differ dramatically in the dynamics of their income. Households
headed by the sons of original PSID members have a highly persistent income
process, whereas households headed by males who marry daughters of the original
PSID members have a much less persistent income process. Using a variety of
methods for identification of the persistence of income shocks, we show that
these differences, albeit surprising, are highly robust.
Joint
with Marcus Hagedorn, University of Oslo and Tzuo
Law, Boston College
Econometrica,
85(1) Jan. 2017, pp. 29-65.
We
assess the empirical content of equilibrium models of labor market sorting
based on unobserved (to economists) characteristics. In particular, we show
theoretically that all parameters of the classic model of sorting based on
absolute advantage in Becker (1973) with search frictions can be
non-parametrically identified using only matched employer-employee data on
wages and labor market transitions. In particular, these data are sufficient to
non-parametrically estimate the output of any individual worker with any given
firm. Our identification proof is constructive and we provide computational
algorithms that implement our identification strategy given the limitations of
the available data sets. Finally, we add on-the-job search to the model, extend
the identification strategy, and apply it to a large German matched
employer-employee data set to describe detailed patterns of sorting and
properties of the production function.
Joint
with Marcus Hagedorn, University of Oslo and Sergiy Stetsenko, GM Financial
Review
of Economic Dynamics, 19(1) Jan. 2016, pp. 161-189.
We
introduce ex-ante heterogeneity between workers and two technology shocks, neutral
and investment-specific, as the driving forces into the basic Mortensen-Pissarides search and matching model. The calibrated model
is simultaneously consistent with a strong response of labor market variables
to cyclical fluctuations in productivity and a weaker response to changes in
taxes found in cross-country data. The model also matches the evidence that
countries with higher tax rates have higher aggregate productivity, lower skill
premia, and higher unemployment rates among both
high- and low-skilled workers. The key mechanism that allows us to achieve
these results is that aggregate and group-specific productivities are
endogenous and respond to changes in tax policy.
Joint
with Fane Groes, Copenhagen Business School and Philipp Kircher, University of Edinburgh
Review of Economic Studies, 82(2) April 2015,
pp. 659-692.
Using
administrative panel data on the entire Danish population we document a new set
of facts characterizing occupational mobility. For most occupations, mobility
is U-shaped and directional: not only low but also high wage earners within an
occupation have a particularly large probability of leaving their occupation,
and the low (high) earners tend to switch to new occupations with lower
(higher) average wages. Exceptions to this pattern of two-sided selection are
occupations with steeply rising (declining) productivity, where mainly the
lower (higher) paid workers within this occupation tend to leave. The facts
conflict with several existing theories that are used to account for
endogeneity in occupational choice, but it is shown analytically that the
patterns are explained consistently within a theory of vertical sorting under
absolute advantage that includes learning about workers' abilities.
Joint
with Hyeok Jeong,
Seoul National University and Yong Kim, Yonsei University
American Economic Review, 105(2)
Feb. 2015, pp. 784-815.
We
identify a key role of factor supply, driven by demographic changes, in shaping
several empirical regularities that are a focus of active research in macro and
labor economics. In particular, demographic changes alone can account for the
large movements of the return to experience over the last four decades, for the
differential dynamics of the age premium across education groups emphasized by
Katz and Murphy (1992), for the differential dynamics of the college premium
across age groups emphasized by Card and Lemieux (2001), and for the changes in
cross-sectional and cohort-based life-cycle profiles emphasized by Kambourov and Manovskii (2005).
Joint
with Marcus Hagedorn, University of Oslo
American Economic Review, 103(2)
April 2013, pp. 771-803.
We
consider a model with on-the-job search where current wages depend only on
current aggregate labor market conditions and idiosyncratic match-specific
productivities. We show theoretically that the model replicates the findings in
Bils (1985) and Beaudry and
DiNardo (1991) on the history dependence in wages. We
develop a method to measure match qualities in the data and show empirically
that various variables summarizing past aggregate labor market conditions have
explanatory power for current wages only because they are correlated with match
qualities. They lose any predictive power once match qualities are accounted
for.
Joint
with Gueorgui Kambourov,
Macroeconomic Dynamics,
17(1) January 2013, pp. 172-194.
The
monthly Current Population Survey (CPS), with its Annual Demographic March
supplement, and the Panel Study of Income Dynamics (PSID) are the leading
sources of data on worker reallocation across occupations, industries, and
firms. Much of the active current research is based on these data. In this
paper, we contrast these datasets as sources of data for measuring the dynamics
of worker mobility. We find that (i) (March) CPS data
is characterized by a substantial amount of noise when it comes to identifying occupational
and industry switches; (ii) March CPS data provides a poor measure of annual
occupational mobility and, instead, most likely measures mobility over a much
shorter period; (iii) (the changes in) the procedure to impute missing data has
a dramatic effect on the interpretation of the CPS data in, e.g., the trend in
occupational mobility. The most important shortcomings of the PSID are the
facts that (i) occupational and industry affiliation
data is available in most years at an annual frequency; (ii) the PSID's sample,
by design, excludes immigrants arriving to the
Joint
with Marcus Hagedorn, University of Oslo
International Economic Review, 52
(3) Aug. 2011, pp. 603-619.
The
productivity-driven Mortensen-Pissarides model predicts
that labor productivity, defined as the ratio of output to employment, is
strongly correlated with employment, unemployment, vacancies and wages whereas
these correlations were argued to be much weaker in the data, especially since
the mid 1980s. We first document that the size of
these discrepancies between the data and the model becomes substantially
smaller if employment data from the Current Population Survey is used in
measuring productivity instead of the commonly used employment data from the Current
Employment Statistics. Second, we show that incorporating time to build and a
stochastic value of home production helps reconcile the quantitative
performance of the model with the data with stochastic productivity being the
key determinant of the business cycle dynamics of the model.
Joint
with Gueorgui Kambourov,
Review of Economic Studies, 76
(2) April 2009, pp. 731-759.
[Extended (but somewhat different) working paper
version available here]
In
this paper we argue that wage inequality and occupational mobility are
intimately related. We are motivated by our empirical findings that human
capital is occupation-specific and that the fraction of workers switching
occupations in the
Joint
with Gueorgui Kambourov,
International Economic Review, 50 (1)
February 2009, pp. 63-115.
We
find that returns to occupational tenure are substantial. Everything else being
constant, 5 years of occupational tenure are associated with an increase in
wages of 12% to 20%. Moreover, when occupational experience is taken into
account, tenure with an industry or employer has relatively little importance
in accounting for the wage one receives. This finding is consistent with human
capital being occupation specific.
Joint
with Marcus Hagedorn, University of Oslo
American Economic Review, 98(4),
September 2008, pp. 1692-1706.
[Extended working paper version available here]
Recently,
a number of authors have argued that the standard search model cannot generate
the observed business-cycle-frequency fluctuations in unemployment and job
vacancies, given shocks of a plausible magnitude. We propose a new calibration
strategy of the standard model that uses data on the cost of vacancy creation
and cyclicality of wages to identify the two key parameters - the value of
non-market activity and the bargaining weights. Our calibration implies that
the model is consistent with the data.
Joint
with Gueorgui Kambourov,
International Economic Review, 49
(1) February 2008, pp. 41-79.
We
document and analyze the high level and the substantial increase in worker
mobility in the United States over the 1968-1997 period at various levels of
occupational and industry aggregation. This is important in light of the recent
findings in the literature that human capital of workers is largely occupation-
or industry-specific. To control for measurement error in occupation and
industry coding, we develop a method that utilizes the Retrospective
Occupation-Industry Supplemental Data Files, newly released by the Panel Study
of Income Dynamics. This allows us to obtain the most reliable estimates of
occupational and industry mobility levels available in the literature. We
emphasize the importance of these findings for understanding a number of issues
such as the changes in wage inequality, aggregate productivity, job stability,
and life-cycle earnings profiles.
Joint with Gueorgui Kambourov, U. of Toronto and Irina Telyukova,
U. of California San Diego
In
Frontiers in Family Economics, Volume 1, edited by Peter Rupert, pp.
217-256, 2008. Emerald Group Publishing Limited,
We study trends in occupational and geographic
mobility of single and married men and women in the
Research
Papers:
March
2022
Joint
with Moritz Kuhn, University of Bonn and Xincheng Qiu, University of Pennsylvania
Spatial
differences in labor market performance are large and highly persistent. Using
data from the United States, Germany, and the United Kingdom, we document
striking similarities across these countries in the spatial differences in
unemployment, vacancies, and job filling, finding, and separation rates. The
novel facts on the geography of vacancies and job filling are instrumental in
guiding and disciplining the development of a theory of local labor market
performance. We find that a spatial version of a Diamond-Mortensen-Pissarides model with endogenous separations and on-the-job
search quantitatively accounts for all the documented empirical regularities.
The model also quantitatively rationalizes why differences in job-separation
rates have primary importance in inducing differences in unemployment across
space while changes in the job-finding rate are the main driver in unemployment
fluctuations over the business cycle.
Discussion with Adrien Bilal:
- Bilal’s critique: “Theories of Job Loss, Job
Finding and Vacancies in the Cross-Section of Locations: A Response to Kuhn et
al. (2021),” Sept. 1, 2022.
- Kuhn, Manovskii,
Qiu’s rebuttal: “The Geography of Worker
and Job Flows: A Rejoinder to Bilal (2022),’’ Sept. 29, 2022.
August
2020
Joint
with Dmytro Hryshko,
University of Alberta
An
accurate quantitative analysis using lifecycle incomplete markets models
requires that they match both the total amount of insurance available to
households in the data and the empirical importance of the sources of insurance
such as, e.g., household saving and borrowing or the tax and transfer system.
The prominent empirical benchmark estimates of the extent and sources of
insurance provided in Blundell, Pistaferri and
Preston (American Economic Review, 2008) imply that the currently used models
poorly fit these data. We show that this is because the income process used as
an input in the incomplete markets models and when constructing the empirical
benchmark estimates of insurance abstracts from the irregular nature of income
observations at the start and end of family income spells. When ignored, this
feature of the income data induces a large bias in the empirical measures of
the degree and sources of insurance and results in a misleading assessment of
the models' performance. The empirical measures of insurance accounting for the
bias imply a limited role of assets and taxes and transfers in insuring
permanent shocks to household budgets.
February
2019
Joint
with Marcus Hagedorn, University of Oslo and Kurt Mitman, IIES Stockholm University
NBER Working Paper 25571.
We
measure the size of the fiscal multiplier using a heterogeneous-agent model
with incomplete markets, capital and rigid prices and wages. The environment
encompasses the essential elements necessary for a quantitative analysis of
fiscal policy. First, output is partially demand-determined due to pricing
frictions in product and labor markets, so that a fiscal stimulus increases
aggregate demand. Second, incomplete markets deliver a realistic distribution
of dynamic consumption and investment responses to stimulus policies across the
population. These elements give rise to the standard textbook Keynesian-cross logic
which, and unlike conventional wisdom would suggest, is significantly
reinforced in our dynamic forward looking model.
We
find that market incompleteness is key to determining the size of the fiscal
multiplier, which is uniquely determined in our model for any combination of
fiscal and monetary policies of interest. The multiplier is 1.34 if
deficit-financed and 0.61 if contemporaneously tax-financed for a pegged
nominal interest rate, with similar values in a liquidity trap. If monetary
policy follows a Taylor rule, the numbers drop to 0.66 and 0.54, respectively.
We elucidate the importance of market incompleteness for our results and
contrast them to models featuring complete markets or hand-to-mouth consumers.
November
2017
Joint
with Marcus Hagedorn, University of Oslo and Kurt Mitman,
IIES Stockholm University
Previous
Version: NBER Working Paper 20884.
We
measure the aggregate effect of unemployment benefit duration on employment and
the labor force. We exploit the variation induced by Congress' failure in
December 2013 to reauthorize the unprecedented benefit extensions introduced
during the Great Recession. Federal benefit extensions that ranged from 0 to 47
weeks across U.S. states were abruptly cut to zero. In sharp contrast to their
typical dynamics, labor force and employment growth accelerated sharply in
states with larger cuts in benefit duration.
January
2019
Joint
with Marcus Hagedorn, University of Oslo, Fatih Karahan, NY Fed, and Kurt Mitman,
IIES Stockholm University
NBER Working Paper 19499.
Equilibrium
labor market theory suggests that unemployment benefit extensions affect
unemployment by impacting both job search decisions by the unemployed and job creation
decisions by employers. The existing empirical literature focused on the former
effect only. We develop a new methodology necessary to incorporate the
measurement of the latter effect. Implementing this methodology in the data, we
find that benefit extensions raise equilibrium wages and lead to a sharp
contraction in vacancy creation, employment, and a rise in unemployment.
May
2016
Joint
with Marcus Hagedorn, University of Oslo and Kurt Mitman,
IIES Stockholm University
NBER Working Paper 22280.
We
critically review recent methodological and empirical contributions aiming to
provide a comprehensive assessment of the effects of unemployment benefit
extensions on the labor market and attempt to reconcile their apparently
disparate findings. We describe two key challenges facing these studies - the
endogeneity of benefit durations to labor market conditions and isolating true
effects of actual policies from agents' responses to expectations of future
policy changes.
Marinescu (2015) employs a methodology
that does not attempt to address these challenges. A more innovative approach
in Coglianese (2015) and Chodorow-Reich
and Karabarbounis (2016) attempts to overcome these
challenges by exploiting a sampling error in unemployment rates as an exogenous
variation. Unfortunately, we find that this approach falls prey to the very
problems it aims to overcome and it appears unlikely that the fundamental bias
at the core of this approach can be overcome. We find more promising the
approach based on unexpected policy changes as in the recent contributions by
Johnston and Mas (2015) and Hagedorn, Manovskii and Mitman (2015). This
approach by design addresses the problem of benefit endogeneity. It does not,
however, fully address the effects of expectations and generally yields a lower
bound on the actual effects of policies.
A More Focused Discussion of
Writings by Chodorow-Reich and Karabarbounis:
- CRK Writings: CRK (2016a) - original piece, CRK (2016b) - reply to
HMM's review, CRK (2016c)
- reply to EFG discussion
- A rebuttal to CRK writings:
August 2016
Joint with Marcus Hagedorn, University of Oslo and Kurt Mitman, IIES Stockholm University
In Hagedorn et al.
(2016a) we reviewed Chodorow-Reich and Karabarbounis (2016a) among other recent contributions to
the literature studying the aggregate implications of unemployment benefit
extensions. We were also invited to discuss their paper at the summer 2016 NBER
EF&G meeting with the slides of our discussion available as Hagedorn et al.
(2016b). We found the identification argument in CRK (2016a) to be incorrect
because the exogeneity of the estimator they proposed
and implemented does not follow from their fundamental identifying assumption
of exogeneity of the measurement error in
unemployment. The authors responded to our assessment in Chodorow-Reich
and Karabarbounis (2016b,c)
and proposed a new identification argument to justify their measurement
strategy. In this paper we explain that their new identification argument does
not overcome the endogeneity problems we previously documented.
Replication package of all the
data, programs, and log files reported in this paper.
April
2014
Joint
with Luigi Bocola, University of Pennsylvania and
Marcus Hagedorn, University of Oslo
The
role of neutral technology shocks in driving business cycle fluctuations is
hotly debated. Yet, we argue that there is no existing empirical methodology
that allows to identify neutral shocks in the data in the presence of input
heterogeneity in the aggregate production function. We develop a method that
identifies a neutral technology shock based on the result that it is the only
shock consistent with balanced growth properties. Monte Carlo simulations using
benchmark business cycle models imply that the proposed method performs very
well in small samples. We apply the method to assess the role of neutral
technology in driving business cycle fluctuations in U.S. data.
September
2010
Joint
with Bjoern Bruegemann,
Yale University
The
US health insurance system for those younger than 65 is and will remain largely
employer-based after the implementation of the 2010 reform. We develop an
equilibrium model of the existing system and study quantitatively the likely
effects of the enacted legislation. We show that to match the key empirical
regularities of the existing system it is essential to model workers as being
discrete, match the firm size distribution and the extent of search frictions,
and to model explicitly government regulations affecting the system, such as
tax-advantaged treatment of employer purchased coverage and legal
non-discrimination restrictions. The model predicts that the enacted reform will
achieve universal coverage. The premium regulations of the reform alone would
induce a collapse of coverage due to adverse selection. But the accompanying
tax credits for small businesses and penalties for individuals are sufficient
to prevent this collapse.
October
2010
Joint
with Marcus Hagedorn, University of Oslo
We
propose a way to measure the contribution of search frictions to the level of
wage dispersion observed in the data. Using the data from the 1979 cohort of
the National Longitudinal Survey of Youth we find that the variance of match
qualities between workers and employers accounts for about 6% of the variance
of log wages. Our method relies on a minimal set of assumptions, the main among
them being that match quality is constant over the duration of a job. We show
that this assumption can be verified empirically and is supported by the data.
October
2009
Joint
with Gueorgui Kambourov,
We
document a significant flattening of life-cycle earnings profiles for the
successive cohorts of male workers entering the labor market since the late
1960s. Further, we provide evidence on the steepening in the profiles of
earnings inequality and an upward shift in the profiles of occupational
mobility for more recent cohorts. We develop a theory that relates these
developments and study quantitatively what fraction of the change in the
life-cycle profiles of earnings and earnings inequality is accounted for by the
economic forces that drive the increase in occupational mobility. The results
indicate that the increase in the variability of productivity shocks to
occupations from the early 1970s to the late 1990s, may account for all these
observations. The theory we propose is consistent with other facts
characterizing the changes in the labor market, such as a sharp increase in
cross-sectional wage inequality and the increase in the transitory variability
of earnings.
Data
Project: Postwar U.S. Labor Productivity Data
Joint
with Bjoern Bruegemann,
Yale University and Marcus Hagedorn, University of Zurich
Latest
Update: October 3, 2010 (Extended unpublished BLS LPC aggregate productivity
series to Q2 2010)
Research on U.S. labor productivity is
complicated by the fact that a variety of measures is in use, which differ along
several dimensions. The objective of this project is to construct and make
available a dataset that contains most relevant series to provide a common
ground for the discussion.
Work in
Progress:
Excessive Risk Taking (with Marcus Hagedorn)
Demand Stimulus and Inflation: Empirical Evidence (with Marcus Hagedorn and Jessie Handbury)
Unemployment Benefits and Unemployment in the Great Recession: The Role of Micro Effects (with Marcus Hagedorn and Kurt Mitman)
Employer Coverage Decisions: Unintended Consequences of 2010 Health Insurance Reform (with Bjoern Bruegemann and Gregory Phelan)
Plugging Holes (with Philipp Kircher)
Interpreting Income Dynamics (with Moira Daly, Fane Groes, and Dmytro Hryshko)
Temporarily
Abandoned Projects:
November
2002
I
show that, in the absence of complete insurance markets, progressive taxation
of labor income may provide productivity and welfare gains as compared to a
revenue-equivalent proportional tax. In order to increase income in the future,
individuals have to forgo income today by accepting lower wages while
accumulating human capital or when destroying specific human capital in order
to build it elsewhere. I first show analytically that a progressive tax system
encourages people to make these temporary sacrifices despite the increased tax
burden when wages are high. Next, I measure the quantitative importance of this
channel in a calibrated general equilibrium model.