The welfare effects of asset mean-testing income support

This paper studies the savings and employment effects of the asset means‐test in US income support programs using a structural life‐cycle model with productivity, disability, and unemployment risk. An asset means‐test incentivizes low‐income households to hold few financial assets making them vulnerable to predictable and unpredictable income changes. Moreover, it incentivizes relatively productive households that happen to have few financial assets to leave the labor force. However, it allows for relative generous transfers to households in most need. Moreover, it counteracts relatively productive households leaving the labor force after the age of 50. In terms of the welfare of an unborn household, the asset means‐test that optimally trades off these effects is $150,000, and abolishing it is close to optimal

Quantifying the contribution of search to wage inequality

We empirically establish that one-third of job transitions leads to wagelosses. Using a quantitative on-the-job search model, we find that60 percent of them are movements down the job ladder. Accountingfor them, our baseline calibration matches the large residual wageinequality in US data while attributing only 13.7 percent of overallwage inequality to the presence of search frictions in the labormarket. We can trace the difference between ours and previous muchhigher estimates to our explicit modeling of nonvalue improvingjob-to-job transitionsThis research has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FTP/2007–2013)/ERC Grant agreement no. 282740. Both authors gratefully acknowledge support from the Deutsche Forschungsgemeinschaft (DFG) through the Bonn Graduate School of Economic

Endogenous hours and the wealth of entrepreneurs

US entrepreneurs typically work long hours in their firms and these hours form a large part of the firms' labor input. This paper studies the role of endogenous owner hours in shaping the wealth distribution among entrepreneurs. We introduce owners' endogenous labor supply into a model of entrepreneurial choice and financial frictions. The model fits well the levels and the dispersion of wealth among entrepreneurs. Long owner hours incentivize poor, highly productive individuals to be owners and help the most productive owners to accumulate large quantities of wealth. On net, owners working long hours decreases the median owner wealth and increase wealth dispersion among owners. Differently, the ability to work sufficiently short hours incentivizes owners to run low productivity firms with high wealth to income ratios. Finally, alternative calibrations ignoring the endogenous labor supply of owners lead to owners that are much richer than in the data and overstate the effect of financial frictions in the economy.We thank the Kauffman Foundation and the NORC Data Enclave for providing research support and access to the data used in this research. We also gratefully acknowledge the support from the Ministerio de Econom`ıa y Competitividad (Spain) (grant numbers ECO2014-56384-P and ECO2015-68615-P), Mar`ıa de Maeztu grant (MDM 2014-0431), and from Comunidad de Madrid, MadEco-CM (S2015/HUM-3444)

Modeling life-cycle earnings risk with positive and negative shocks

We estimate explicit age-varying distributions of idiosyncratic persistent and transitory earnings shocks over workers' life-cycles using a German administrative data set. Large positive shocks, both transitory and persistent, are characteristic for the first eight years of the working life. After the age of 50, large negative shocks become a major source of earnings risk. Between the ages of 30 and 50, most shocks are small and transitory. Large persistent positive shocks that occur early in the working life help to rationalize large wealth and consumption shares of the top one percent in an incomplete markets model.This paper uses the Sample of Integrated Labour Market Biographies-Regional File 1975-2010, SIAB R 7510. The data was provided via the Cornell Restricted Access Data Center, previous authorization of the Research Data Center of the German Federal Employment Agency at the Institute for Employment Research, under the project 'Labour Income Profiles are not heterogeneous: a European test'. Felix Wellschmied gratefully acknowledges support from the Spanish Ministry of Economics through research grants ECO2014-56384-P, MDM 2014-0431, and Comunidad de Madrid MadEco-CM (S2015/HUM-3444)

Worker churn in the cross section and over time: New evidence from Germany

Worker churn is procyclical in the German labor market. We study the plant-level connection of churn and employment growth using the new Administrative Wage and Labor Market Flow Panel from 1975 to 2014. Churn is V-shaped in employment growth. Through analyzing this pattern by worker skill, age, and tenure, we establish that churn is unlikely to result from plant reorganization but rather from uncertainty about match quality. In a dynamic labor demand framework with a time-to-hire friction, churn can be interpreted as a manifestation of idiosyncratically stochastic separation shocks. These shocks become larger and more predictable during booms, leading to procyclical churn.The research leading to these results has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FTP/2007-2013) / ERC Grant agreement no. 282740. Felix Wellschmied gratefully acknowledges support from the Spanish Ministry of Economics through research grants ECO2014-56384-P, MDM 2014-0431, and Comunidad de Madrid MadEco-CM (S2015/HUM-3444). Heiko Stüber gratefully acknowledge support from the German Research Foundation (DFG) under priority program “The German Labor Market in a Globalized World” (SPP 1764). Christian Merkl gratefully acknowledge support from SPP 1764 and the Hans Frisch Stiftung