Working Paper: CEPR ID: DP16370
Authors: Isaac Baley; Lars Ljungqvist; Thomas J. Sargent
Abstract: Although they are studied too rarely, returns to labor mobility transmit important forces that decisively shape outcomes in macro-labor models. By focusing on returns to labor mobility, this paper sheds new light on calibrations of influential macro-labor studies and resolves an issue about the turbulence-theoretic explanation of trans-Atlantic unemployment experiences. It does so by invoking a cross-phenomenon restriction -- in our case, how returns to labor mobility determine effects on unemployment of changes in layoff costs, on the one hand, and changes in quit turbulence, on the other hand. We also spotlight two distinct perspectives and associated sources of data: one from labor economics and another from the economics of industrial organization. Ultimately, we are reminded of the rule that new theories "must not throw out all the successes of former theories. ... to preserve the successes of the past is not only a constraint, but also a guide."
Keywords: labor mobility; quits; turnover; layoff cost; turbulence; unemployment; human capital; skills; matching model; search-island model
JEL Codes: E24; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| layoff costs (J63) | labor mobility (J62) |
| labor mobility (J62) | unemployment rates (J64) |
| layoff costs (J63) | unemployment rates (J64) |
| quit turbulence (E32) | workers' willingness to quit jobs (J63) |
| workers' willingness to quit jobs (J63) | skill loss perception (J24) |