• Local Labor Markets: Job Ladder, Wage Growth and Unemployment

Abstract: I document that within location job-to-job switch wage growth is on average 40% greater in high unemployment area than low unemployment area in the U.S. This difference contrasts with the similar within location job-to-job switch rate across high and low unemployment area. Along the job ladder, the more job-to-job switches a worker has made post-unemployment, the less wage growth they yield in their job switch. Interpreting these facts jointly using a job ladder model, I highlight that a larger job-to-job wage growth signifies greater mismatch in the initial job. In the model, locations only exogenously differ in job destruction probability and firms in each location make job type creation choice. Places with large job destruction probability discourage firms to invest and bad jobs are created. The high job destruction rate frequently forces workers to restart their search from unemployment, while bad job creation increases the chance of workers obtaining low match quality. Therefore, workers in high unemployment area are lower down in the job ladder, more mismatched and have larger wage growth potential when they make a job-to-job switch. The calibrated model offers a novel channel to speak to the empirical finding that productivity in high unemployment area dropped more than low unemployment area during the 2007-09 recession. Even with the same decrease in matching efficiency across regions, productivity in high unemployment area declines more, since it loses job-to-job switches that have larger productivity gains.

• Job Recalls and Worker Flows over the Life Cycle  (with Xincheng Qiu)

Abstract: The share of jobless spells that end with recalls, i.e., returning to the previous job, as opposed to finding a new job, is strongly increasing over the life cycle. Throughout the life cycle, wage changes associated with recalls are concentrated at zero, different from the wage change behavior of new-job findings or job-to-job transitions. We find that the introduction of recall options into a job-ladder search model provides a novel mechanism that reproduces a declining job finding rate over the life cycle. The model quantitatively accounts for empirical patterns of life-cycle labor market dynamics. Deterioration of aggregate matching efficiency in bad times hurts labor market entrants more than experienced workers, because job-finding prospects of entrants rely more on the matching function of the labor market, whereas experienced workers rely less and get more recalls.