Continue to update unemployment course for W25

Author: pmichaillat

content/courses/c1.md

@@ -1,6 +1,6 @@
 ---
 title: "Unemployment" 
-date: 2025-01-05
+date: 2025-01-06
 url: /c1/
 aliases:
     - /t1.html
@@ -123,7 +123,7 @@ This section reviews basic facts about the labor market and unemployment in the
 for the shift from print job advertising to online job advertising in the 1990s.
 + [Petrosky-Nadeau and Zhang (2021)](https://doi.org/10.1016/j.jmoneco.2020.01.009) – This paper combines various historical datasets to extend the BLS measure of US unemployment rate (which starts in 1948) and the Barnichon measure of US vacancy rate (which starts in 1951). The resulting measures of the US unemployment and vacancy rates go back to World War 1 (1919).
 + [Shimer (2012)](https://doi.org/10.1016/j.red.2012.02.001) – This paper shows that in the United States, unemployment fluctuations are caused by fluctuations in the job-finding rate and not fluctuations in the job-separation rate.
-+ [Michaillat and Saez (2015)](/16.pdf) – This paper combines data on unemployment and job vacancies to build a new recession rule. The rule detects all US recessions since 1929, without errors, and it detects them faster than well-known existing rules. The rule shows that the US economy may have entered a recession as early as March 2024.
++ [Michaillat and Saez (2024)](/16.pdf) – This paper combines data on unemployment and job vacancies to build a new recession rule. The rule detects all US recessions since 1929, without errors, and it detects them faster than well-known existing rules. The rule shows that the US economy may have entered a recession as early as March 2024.
 
 ##### Practice material
 
@@ -209,16 +209,16 @@ This section discusses the labor market institutions that determine wages, such
 
 ##### Main readings
 
-+ [Bewley (2004)](https://docs.iza.org/dp1137.pdf) – This survey explains how wages are set, why wages are rigid, and in particular why wages do not fall in recessions. It finds that firms avoid pay cuts because cuts damage morale and therefore reduce productivity, increase turnover, and complicate recruiting.
++ [Bewley (2005)](https://doi.org/10.7551/mitpress/4771.003.0017) – This survey explains how wages are set, why wages are rigid, and in particular why wages do not fall in recessions. It finds that firms avoid pay cuts because cuts damage morale and therefore reduce productivity, increase turnover, and complicate recruiting.
 + [Haefke, Sonntag, and Van Rens (2013)](https://doi.org/10.1016/j.jmoneco.2013.09.003) – This paper estimates that the real wages of new hires are somewhat rigid. The elasticity  of real wages with respect to productivity is between 0.7 and 0.8, so less than 1.
 
 ##### Additional readings
 
 + [Akerlof (1984)](https://www.jstor.org/stable/1816334) – This survey reviews various theories of efficiency wages. These theories try to explain how firms set wages in practice. They consider the effect of wages on productivity, attachment to the firm, retention, hiring, and so on.
-+ [Raff and Summers (1987)](https://doi.org/10.1086/298165) – This paper examines Henry Ford's introduction of the five-dollar day in 1914 in an effort to evaluate the relevance of efficiency wage theories of wage and employment determination. We conclude that the Ford experience strongly supports the relevance of these theories. Ford's decision to increase wages dramatically is most plausibly the consequence of labor problems of the kind efficiency wage theorists stress. The structure of the five-dollar day program is consistent with the predictions of efficiency wage theories. There is vivid evidence that the introduction of the five-dollar day resulted in substantial queues for Ford jobs. Significant increases in Ford productivity and profits accompanied the new regime.
-<!-- + [Dickens et al (2007)](https://doi.org/10.1257/jep.21.2.195) – This paper provides international evidence of wage rigidity. -->
-<!-- Jacoby (1984)
-Mas (2007) -->
++ [Jacoby (1984)](https://mitpress.mit.edu/9780262651059/internal-labor-markets/) – This chapter analyzes the development of internal labor markets in American manufacturing firms. It explains how internal labor markets replaced spot labor markets, and how such replacement provided workers with an employment system that was more bureaucratic, more
+rule-bound, and more secure. In particular, wages paid to workers were much more rigid in internal labor markets.
++ [Raff and Summers (1987)](https://doi.org/10.1086/298165) – This paper examines Henry Ford's introduction of the five-dollar day in 1914. It finds that Ford's decision to increase wages dramatically is most plausibly the consequence of labor problems of the kind efficiency-wage theories stress. Moreover, the introduction of the five-dollar day resulted in substantial queues for Ford jobs, significant increases in productivity, and significant increases in profits.
++ [Mas (2006)](https://doi.org/10.1162/qjec.121.3.783) – This paper finds evidence in favor of efficiency-wage theories: when police officiers receive a wage below what they consider a fair wage, they are disappointed, and their performance on the job drops. This finding confirms that fairness might be an important source of wage rigidity.
 
 ##### Practice material
 
@@ -261,6 +261,9 @@ This section discusses unemployment fluctuations in the matching model. We first
 ##### Additional readings
 
 + [Hall and Milgrom (2008)](https://doi.org/10.1257/aer.98.4.1653) – This paper proposes a form of wage bargaining that produces somewhat-rigid wages. With such bargaining protocol, the matching model generates realistic fluctuations in unemployment and vacancies.
++ [Hagedorn and Manovskii (2008)](https://doi.org/10.1257/aer.98.4.1692) – This paper shows that if workers are almost indifferent between working and not working, then a matching model with wage bargaining generates realistic fluctuations in unemployment and vacancies. A downside of this assumption, however, is that it is completely inconsistent with the large psychosocial cost of unemployment documented at the beginning of the course. Another downside is that it implies that the socially efficient rate of unemployment is above 20%.
++ [Gertler and Trigari (2009)](https://doi.org/10.1086/597302) – This paper shows that the matching model generates realistic fluctuations in unemployment and vacancies when period-by-period wage bargaining is replaced by multiperiod wage bargaining. Under multiperiod bargaining, firm and worker agree on a fixed wage that remains in place for several periods.
++ [Blanchard and Gali (2010)](https://doi.org/10.1257/mac.2.2.1) – This paper 
 
 ##### Practice material
 
@@ -304,11 +307,13 @@ Technically, typical matching models do not feature job rationing because their
 
 ##### Main readings
 
-+ [Michaillat (2012)](/1.pdf) – This paper establishes that usual matching models do not have job rationing and develops a matching model with job rationing. In that model unemployment can be decomposed into rationing and frictional components. In recessions, the rationing component is large while the frictional component is small.
-+ [Michaillat and Saez (2015)](/3.pdf) – This paper adds aggregate demand to the model in Michaillat (2012). This is done by adding a product market to the labor market with a similar matching structure. Aggregate demand shocks generate fluctuations in unemployment and vacancies along the Beveridge curve.
++ [Michaillat (2012)](/1.pdf) – This paper first establishes that usual matching models do not have job rationing and then develops a matching model with job rationing. In that model unemployment can be decomposed into rationing and frictional components. In recessions, the rationing component is large while the frictional component is small.
++ [Michaillat and Saez (2015)](/3.pdf) – This paper adds aggregate demand to the model in Michaillat (2012). This is done by adding a product market to the labor market with a similar matching structure. Aggregate demand shocks generate fluctuations in unemployment and vacancies along the Beveridge curve. In that model, unemployment can be decomposed into three components: Keynesian unemployment (due to insufficient aggregate demand), classical unemployment (due to high real wages), and frictional unemployment (due to matching frictions).
 
 ##### Additional readings
 
++ [Crepon, Duflo, Gurgand, Rathelot, and Zamora (2013)](https://doi.org/10.1093/qje/qjt001) – This paper reports the results from a randomized experiment designed to evaluate the direct and indirect effects of job-placement assistance on the labor market outcomes of young educated jobseekers in France. It finds that jobseekers who are given job-placement assistance find jobs more rapidly, while jobseekers in the same labor market who are not assisted take longer to find  a job. This finding suggests that jobs are somewhat rationed, and that assisted jobseekers move ahead of nonassisted jobseekers in job queues.
++ 
 + [Michaillat and Saez (2022)](/7.pdf) –  This paper builds a dynamic version of the model in Michaillat and Saez (2015), which is static. In this model the central bank can influence aggregate demand and unemployment through interest rates.
 + [Michaillat and Saez (2024)](/15.pdf) – This paper uses the dynamic model in Michaillat and Saez (2022) and generates a Phillips curve by introducing price competition through directed search. To ensure that unemployment fluctuates, the model assumes price rigidity through quadratic price-adjustment costs. The Phillips curve produced by the model guarantees divine coincidence: inflation is on target when unemployment is efficient.
 
@@ -459,8 +464,9 @@ In the United  States, unemployment insurance is more generous in bad times than
 ##### Additional readings
 
 + [Chetty (2006)](https://doi.org/10.1016/j.jpubeco.2006.01.004) – This paper studies optimal unemployment insurance in a model with fixed tightness and derives the Baily-Chetty formula.
-+ [Marinescu (2017)](https://doi.org/10.1016/j.jpubeco.2017.02.012) – This paper examines how the tripling of the duration of unemployment benefits during the Great Recession impacted the US labor market. It finds that the number of job applications fell while the number of job openings remained that same. Therefore, labor market tightness (the ratio of job openings to job applications) increased when unemployment insurance became more generous.
 + [Lalive, Landais, and Zweimueller (2015)](https://doi.org/10.1257/aer.20131273) – This paper uses a natural experiment in Austria to measure the response of labor market tightness to unemployment insurance. The experiment consists of an increase in benefit duration from 52 to 209 weeks for eligible unemployed workers in a subset of regions. Ineligible unemployed workers in treated labor markets experienced significantly lower unemployment duration, which implies that labor market tightness rose in treated labor markets. 
++ [Marinescu (2017)](https://doi.org/10.1016/j.jpubeco.2017.02.012) – This paper examines how the tripling of the duration of unemployment benefits during the Great Recession impacted the US labor market. It finds that the number of job applications fell while the number of job openings remained that same. Therefore, labor market tightness (the ratio of job openings to job applications) increased when unemployment insurance became more generous.
++ [Dieterle, Bartalotti, and Brummet (2020)](https://doi.org/10.1257/pol.20160439) – This paper shows substantial spillovers across US states when one state changes the duration of its UI benefits and the other does not. In particular, workers from the low-UI state tend to flock to the high-UI state, suggesting increased labor market tightness in the high-UI state.
 
 ##### Practice material
 

content/courses/c2.md

@@ -273,7 +273,7 @@ This section reviews evidence from microdata and ethnographic surveys. The evide
 ##### Additional readings
 
 + [Shimer (2005)](https://doi.org/10.1257/0002828053828572) – This paper shows that in a matching model with Nash bargaining, wages are too flexible to generate realistic fluctuations in unemployment and vacancies.
-+ [Bewley (2004)](https://docs.iza.org/dp1137.pdf) – This paper provides evidence of wage rigidity. It then argues that firms avoids pay cuts because they damage morale, which eventually reduces productivity, increases turnover, and complicates recruiting.
++ [Bewley (2005)](https://doi.org/10.7551/mitpress/4771.003.0017) – This paper provides evidence of wage rigidity. It then argues that firms avoids pay cuts because they damage morale, which eventually reduces productivity, increases turnover, and complicates recruiting.
 + [Haefke, Sonntag, van Rens (2013)](https://doi.org/10.1016/j.jmoneco.2013.09.003) – This paper constructs a series for wages of newly hired workers and find that the elasticity of these wages with respect to productivity is 0.7–0.8.
 + [Hazell and Taska (2024)](https://jadhazell.github.io/website/Downward_Rigidity.pdf) – This paper shows that the wage for new hires is rigid downward and flexible
 upward. The wage attached to each job does not respond to rises in unemployment, but it rises strongly when unemployment falls.